# Credit Management Practise Exam Task 4

LondonRegistered Posts: 132
Hi,

I'm hoping someone can help me as I'm really stuck on how to complete this question, I'm unsure how to work out the difference in the % between the years I've looked through my books and online but i cannot seem to come back to these answers.

Really hoping someone can help.

Thanks
Sophie

• LondonMAAT, AAT Licensed Accountant Posts: 198
The gross profit has fallen in absolute terms by:
(14,177 / 17,215) - 1 = -0.17647 = 17.65% fall

and the increase of:

[(8,598 + 5,595) / (7,535 + 5,357)] - 1 =
(14,193 / 12,892) - 1 = 0.1009 = 10.09%

in combined distribution and administration costs
• LondonRegistered Posts: 132
hal978 said:

The gross profit has fallen in absolute terms by:
(14,177 / 17,215) - 1 = -0.17647 = 17.65% fall

and the increase of:

[(8,598 + 5,595) / (7,535 + 5,357)] - 1 =
(14,193 / 12,892) - 1 = 0.1009 = 10.09%

in combined distribution and administration costs

thanks so much for replying without sounding silly where do you get the -1 from?
• LondonMAAT, AAT Licensed Accountant Posts: 198
The result would be a ratio or an index if I don't take out the 1 (e.g. 0.8235 or 1.1009). So to convert it to a percentage change, 1 has to be deducted.

Alternatively it could be calculated like this:

[(14,177 - 17,215) / 17,215] = -3,308 / 17,215 = -0.17647 = 17.65% fall
• LondonRegistered Posts: 132
edited September 2020
hal978 said:

The result would be a ratio or an index if I don't take out the 1 (e.g. 0.8235 or 1.1009). So to convert it to a percentage change, 1 has to be deducted.

Alternatively it could be calculated like this:

[(14,177 - 17,215) / 17,215] = -3,308 / 17,215 = -0.17647 = 17.65% fall

thank you for helping me with this, the whole task is a bit if a struggle for me do you have any tips for this task?
• LondonRegistered Posts: 132
would anyone be able to tell me how they got to this gearing ratio answer please?
• LondonRegistered Posts: 132
edited September 2020
would anyone be able to tell me how they got to this gearing ratio answer of 233.80 please
• LondonRegistered Posts: 132
would anyone be able to tell me how they got to this gearing ratio answer please?

would anyone be able to tell me how they got to this gearing ratio answer of 233.80 please

does anybody have any idea please?
• MAAT Posts: 471
Hi Sophie

I didn't do the credit management module. But from the financial statements and D&C.

The Gearing ratio is - Debt/Equity *100

(21500+2750)/10372 *100 = 233.80

I hope this helps might be worth checking the Credit management follows the same rules.
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• ManchesterRegistered Posts: 36
Pian32 said:

Hi Sophie

I didn't do the credit management module. But from the financial statements and D&C.

The Gearing ratio is - Debt/Equity *100

(21500+2750)/10372 *100 = 233.80

I hope this helps might be worth checking the Credit management follows the same rules.

I assume that they will also accept D/D+E *100 also? As this calculation gives a completely different figure obviously.
• Registered, AAT Student Posts: 15
Hi, sorry to jump in but I got stuck on the same part too. Does anyone know if D/D+E would be accepted as the question does not state different? Also I am struggling to find the credit terms (attached), any help would be appreciated.

Thanks
• Registered, AAT Student Posts: 15
Hi, sorry to jump in but I got stuck on the same part too. Does anyone know if D/D+E would be accepted as the question does not state different? Also I am struggling to find the credit terms (attached), any help would be appreciated.

Thanks
• Registered, AAT Student Posts: 15
Hi, sorry to jump in but I got stuck on the same part too. Does anyone know if D/D+E would be accepted as the question does not state different? Also I am struggling to find the standard payment terms at the end of the liquidity part, any help would be appreciated.

Thanks
• LiverpoolAAT Student, AATQB Posts: 33
It can be:

Total debt ÷ (total debt + equity) x 100

Or long term debt could be used instead of total debt. The exam usually states what formula to use to calculate gearing.

If total debt is used, remember it only includes the borrowings/loans in the current and non-current liabilities. Don't include any trade payables.

Good luck.
AAT
Level 2 - Foundation Certificate in Accounting - Aug 2019
Level 3 - Advanced Diploma in Accounting - Aug 2020
Passed: Level 4 - Credit Management - 85%
Passed: Level 4 - Personal Tax - 86%
Passed: Level 4 - Budgeting - 84%
Passed: Level 4 - Decision & Control - 91%
Passed: Level 4 - Financial Statements of Limited Companies - 89%