ACCA FM · Chapter 3 · Question 9 of 10
A company made credit purchases of $2.92m during the year and its cost of sales was $3.65m. Trade payables were $280k at the start of the year and $360k at the year end. Using year-end payables and credit purchases, what is the trade payables payment period (365-day year)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) 45 days
Explanation
Payables days = year-end trade payables / credit purchases x 365 = 360 / 2,920 x 365 = 45 days (exact). Using cost of sales gives 36 days, using average payables gives 40 days, and 8 is the number of times payables are turned over in a year rather than a number of days.
More Working capital: the cash operating cycle and ratios MCQs
- Q1Extracts from a company's financial statements show: revenue (all on credit) $7,300k, cost of sales $5,110k, inventory $840k, trade…
- Q2A manufacturer provides the following annual data ($000): purchases of raw materials 2,190, cost of sales 3,650, credit sales 4,380…
- Q3A company has inventory of $450k, trade receivables of $380k, cash of $70k and current liabilities of $600k. What are its current ratio…
- Q4Which of the following is a typical symptom of overtrading?
- Q5Why is there said to be a conflict between the two main objectives of working capital management?