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QUESTION: 96

Select THREE actions that should be taken by a business offering credit to its customers to ensure that amounts owing are collected as quickly as possible.

Chase up slow payers with reminder letters.
Monitor outstanding trade receivables.
Extend the credit terms available to customers.
Issue invoices quickly.
Monitor outstanding trade payables.
Take longer to settle trade payables than collect trade receivables.

Answer(s): A,B,D

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QUESTION: 97

Which of the following statements about trade payables management is false?

Trade payables are an important source of finance.
When goods are in short supply customers who pay immediately are likely to be given priority over customers who take credit.
Trade payables should be paid as quickly as possible.
Goods or services may be more costly if extended credit is required.

Answer(s): C

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CORRECT TEXT
Refer to the exhibit.

An entity sells 2,000 bags of product X each year. It has been estimated that the cost of holding one bag of product X is £4.
The cost of placing an order is £250.
where:
Co = cost of placing an order
Ch = cost of holding one unit in inventory for one year D = annual demand
Calculate the Economic Order Quantity (EOQ) for bags of product X. Give your answer to the nearest whole number of bags.

500 bags

Answer(s): A

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QUESTION: 99

CORRECT TEXT
The following data relates to Company AB.
Statement of Profit or Loss for the year ended 30 June 20X4:

During the year ending 30 June 20X4, which was not a leap year, the average stock holding period was 102 days.
Calculate the working capital cycle in days.
Give your answer to the nearest full day.