Question 26.Q9: “The ratio has increased in 20X8 compared to 20X7 because we...
“The ratio has increased in 20X8 compared to 20X7 because we have increased the length of time allowed for customers to pay their invoices”.
A decrease in which ratio could be explained by the statement above?
A The receivables collection period
B The gearing ratio
C Interest cover
D The payables payment period
A The receivables collection period measures the time taken for customers to pay their debts. If a company allows customers to take longer to pay their debts, then the receivables collection period will increase. The other ratios are unlikely to be affected by this change.
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