ACCA Financial Management (F9) Certification Practice Exam

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Prepare for the ACCA Financial Management (F9) Certification Exam with engaging quizzes and interactive content. Dive deep into financial management concepts and boost your exam confidence with questions that come with detailed explanations.

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What should be calculated to determine if a discount on receivables is beneficial for the company?

Opportunity cost of capital
Change in receivable days and overdraft difference
Market value of shares
Averaged interest rates

The correct answer is: Change in receivable days and overdraft difference

To determine if a discount on receivables is beneficial for a company, it is essential to calculate the change in receivable days and the difference in overdraft costs. Analyzing the change in receivable days provides insight into how quickly the company can convert its receivables into cash. If the discount leads to a significant reduction in the days receivables remaining outstanding, this can improve cash flow and reduce the need for borrowing or overdraft facilities. Moreover, understanding the overdraft difference is crucial since receiving payments sooner may decrease the reliance on costly overdraft financing. If the cost savings from reduced overdraft usage thanks to quicker cash flows exceed the cost of providing the discount, it can indicate that the discount is indeed beneficial for the company. This analysis directly links cash flow management with pricing strategies concerning receivables, guiding the company in making informed financial decisions.