ACCA FA · Chapter 14 · Question 8 of 10
A company's trade receivables collection period has increased from 35 days to 52 days. Which of the following is the most likely explanation?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Credit control has become less effective
Explanation
A longer collection period means customers are taking longer to pay, which may indicate weaker credit control, more generous credit terms or customers in financial difficulty. Early settlement discounts, faster-paying customers and more cash sales would all tend to shorten the collection period.
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