ExpertEasy2 marksMultiple Choice
ACCA · Question 16 · Working Capital Management
Section B - Case 1: AquaHarvest
Scenario: AquaHarvest operates offshore kelp farms. The company has annual credit sales of $18 million. Currently, customers take an average of 45 days to pay. AquaHarvest finances its working capital through a bank overdraft at an interest rate of 8% per annum. Assume a 365-day year.
Question: What is the current value of AquaHarvest's receivables balance? (Round to the nearest whole dollar)
Section B - Case 1: AquaHarvest
Scenario: AquaHarvest operates offshore kelp farms. The company has annual credit sales of $18 million. Currently, customers take an average of 45 days to pay. AquaHarvest finances its working capital through a bank overdraft at an interest rate of 8% per annum. Assume a 365-day year.
Question: What is the current value of AquaHarvest's receivables balance? (Round to the nearest whole dollar)
Answer options:
A.
$1,479,452
B.
$2,219,178
C.
$4,000,000
D.
$810,000
How to approach this question
Use the receivables formula: Receivables Balance = (Annual Credit Sales / 365) * Receivables Days.
Full Answer
B.$2,219,178✓ Correct
The receivables balance represents the amount of money tied up by customers who haven't paid yet.
Calculation: ($18,000,000 / 365 days) * 45 days = $49,315.07 * 45 = $2,219,178.
Common mistakes
Using 360 days instead of 365 when the question explicitly states to use 365.
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