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Hello
The answer mentions that there is an unusual trend in the receivables collection period with residential customers receivables collection period increasing from 58 to 65 days while business reduced from 55 to 50 days.
I would like to know the reason for that statement please. In my opinion i dont think adequate information was provided in the question to come up with that statement since payment periods while influenced by the vendor are ultimately decided by the consumers.
Regards
We’re told within the question that the collection period for residential customers has risen from 58 days to 65 days – that’s an increase of over 12%
Sure, customers (residential and business) decide when they are going to pay so collection periods are very much out of our hands
But an increase in collection days of greater than 12%
There has to be some reason why people are changing their minds about how quickly they should pay their debts – that’s an increase from just over 8 weeks historically to a current 10 weeks
Is this because of tightening pockets in the residential world or could it possibly be due to some factor from within the company itself
Within the question there is the news about a new billing system – Ah! There’s a clue
Now consider this … the examiner has included that information within the question for a reason. The skill that is required of you is to work out the reason why that information is in the question
It’s there to be used!
OK?
But you ignore given information at your peril!
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