Corporate Finance working capital mgmt

deepakkrkanodia
Finance Junkie
Posts: 49
Joined: Thu Aug 09, 2012 4:45 pm

Corporate Finance working capital mgmt

Postby deepakkrkanodia » Fri Oct 26, 2012 1:23 pm

Question - Blodnick Corp has found that its weighted average collection period has increased from 50 days last year to 55 days this year, and its average days of receivables this year is 48 compared to 52 last year. It is most likely that:

A. Blodnick has relaxed its credit standards this year.
B. Blodnick's credit customers are paying more slowly tis year.
C. credit sales are a greater part of Blodnick's business this year


Query: please tell what is the actual difference between weighted average collection period and its average days of receivables.(as both have the same meaning from my point of view, please correct if i am wrong.)
I had anwered it as C as average collection period i thought includes credit sales and weighted average collection period includes total sales.

The right answer is B and why is it so?

Regards

Deepak

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content.pristine
Finance Junkie
Posts: 356
Joined: Wed Apr 11, 2012 11:26 am

Re: Corporate Finance working capital mgmt

Postby content.pristine » Fri Nov 02, 2012 8:17 pm

Hi Deepak,

You are right.. They are both the same.
This question seems completely wrong.
Thanks for bringing it to our notice

8-)


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