Question

There is deterioration in the management of working capital of XYZ Ltd. What does it refer to?

• A. That the capital employed has reduced
• B. That the profitability has gone up
• C. That debtors collection period has increased
• D. That sales has decreased

Answer 1

Answer: (C)

That debtors collection period has increased

Debtor collection period is the time that it takes to convert balances from account receivables back into cash flow. This can apply to an individual transaction or to the business's overall transaction history for a period of time. The lower the debtor collection period the more efficient is the company in collecting payment from its customers.