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CIMA Exam CIMAPRA19-F01-1 Topic 3 Question 68 Discussion

Actual exam question for CIMA's CIMAPRA19-F01-1 exam

Question #: 68
Topic #: 3

[All CIMAPRA19-F01-1 Questions]

AB has been asked to analyze the receivables days of an entity with a view to improving the working capital cycle.

The following results have been produced for receivable days:

Which of the following is NOT an explanation of why the days have increased?

AThe entity has increased turnover for year ended 31 December 20X2 by offering extended credit terms.

BThe entity has made substantial sales to overseas entities in the last few months of the year ended 31 December 20X2.

CThe entity has transferred all receivables collections to a factoring agency during 20X2.

DAn inexperienced credit controller was employed in the last few months of year ended 31 December and requires substantial training.

Show Suggested Answer

Suggested Answer: C

by Sarah at Apr 03, 2023, 06:54 AM

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Aimee

5 days ago

Hiring an inexperienced credit controller would definitely explain the rise in receivables days, as they may not be as efficient at collections. But the question asks for what is NOT an explanation, so D is not the right answer.

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Francesco

13 days ago

The increase in receivables days is clearly not due to transferring collections to a factoring agency, as that would reduce the receivables balance and the days outstanding. This is a straightforward elimination of C as the correct answer.

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Deane

13 days ago

But C seems like a valid reason for the increase in receivable days.

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Marguerita

17 days ago

I disagree, I believe the answer is D.

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Deane

20 days ago

I think the answer is C.

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