Question 1

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)

Accepted Answer

Use the receivables formula: Receivables Balance = (Annual Credit Sales / 365) * Receivables Days.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Using 360 days instead of 365 when the question explicitly states to use 365.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FM — Financial Management Practice Exam 6

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