Trade Payable Days Quiz

What does a high trade payable days figure indicate for a business?

• The business is not purchasing goods on credit.

• The business is paying its creditors too quickly.

• The business is facing liquidity problems.

• The business is holding onto its money for a longer period.

Why is it important for a business to adhere to agreed payment terms with creditors?

• To avoid paying interest on late payments.

• To prevent liquidity issues and maintain good relationships.

• To increase their trade receivables.

• To ensure they receive discounts on future purchases.

What could happen if a business forces a debtor to repay earlier than agreed?

• The debtor might increase future orders.

• The debtor might offer a discount.

• The business could face legal action.

• The business might damage its reputation.

In the example provided, what were the trade payables for Tom's Tops?

• £73,000

• £160,000

• £32,000

• £60,000

How is the trade payable days ratio calculated?

• Trade payables divided by total sales, multiplied by 365.

• Trade receivables divided by credit purchases, multiplied by 365.

• Credit purchases divided by trade payables, multiplied by 365.

• Trade payables divided by credit purchases, multiplied by 365.