Green Light Test Errors - Calculating Performance Indicators

TomWhite90

1) The same answer/option has been given twice

Select the correct answer.

Which of the following statements about the trade payables payment period and trade receivables collection period is correct?

Correct It’s best practice to aim to keep the receivables days as low as possible
It’s best practice to aim to keep the payables days as high as possible
It’s best practice to aim to keep the payables days as high as possible
An advantage of the trade receivables collection period calculation is that, by giving a figure as a specific number of days, it facilitates easy comparisons with other organisations


2) The calculations at the base of the model answer match the true calculation for Trade Payable Days of 28.26 but in the answer the correct number is showing as 28.62 and is therefore marking my answer as partially correct only.

20X1

20X2

Trade receivable payment days

18.25
Correct
17.68
Correct
Trade payables payment days

27.62
Correct
28.62
Correct
Inventory days

17.76
Correct
14.91
Correct
Working capital cycle days

8.39
Correct
4.33
Correct


Explanation of the correct answer:
Trade receivable days: 20X1 = 150/3,000 * 365 = 18.25.

Trade receivable days: 20X2 = 155/3,200 * 365 = 17.68.

Trade payable days: 20X1 = 70/925 * 365 = 27.62.

Trade payable days: 20X2 = 72/930 * 365 = 28.26.

Inventory days: 20X1 = 45/925 * 365 = 17.76.

Inventory days: 20X2 = 38/930 * 365 = 14.91.

Working capital cycle days: 20X1 = 18.25 + 17.76 - 27.62 = 8.39.

Working capital cycle days: 20X2 = 17.68 + 14.91 - 28.26 = 4.33.

AndrewLeyland

Hi Tom, It does look like a human error when the test was created. I would not worry about this. Remember Green light tests are there to help indicate if you need to study a topic more. Good luck with your exam if you have not already sat this.