Sir,
Am struggling to understand this one.
Specimen question 6(mcq)
The following has been calculated from fowler financial statements for the year ended 30/9/2014
Fowler cash cycle at 30/9/2014 is 70 days
Its inventory turnover is six times
year-end trade payable are $ 230,000
Purchase on credit for the year were $ 2m
cost of sales for year was $1.8m
What is Fowler trade recievable collection period as at 30/9/2014. the trading days is 365 days and all calculations should be to the nearest day.
Thanks sir in advance
Ask the Tutor ACCA FR
working capital
11y ago#1You are told that the cash cycle is 70 days and (hopefully) you remember that cash cycle = inventory days + receivable days - payables days
Inventory days = 365 / 6 = 61 days
Payables days = 230 / 2,000 x 365 = 42 days
So receivables days = 70 - 61 + 42 = 51 days
Ok?
Good Morning sir
Thanks a million times.
11y ago#3You're welcome - it's worth remembering the equation - you just never know when you'll need it again
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