I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART H: INTERPRETATION OF FINANCIAL STATEMENTS 

 

478

 

QUESTION 

Interpreting information V

 

'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 

ANSWER 

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.