Home › CS Executive › fsm › Nature, Significance and Scope of Financial Management › The lesson uses the Average Collection Period (A…
The lesson uses the Average Collection Period (ACP) as a liquidity indicator. According to the lesson, what does a very high ACP value indicate about a company?
Answer & Solution
Correct answer: A.
1. The lesson uses the Average Collection Period to assess receivables liquidity.
2. Too high an ACP indicates too liberal a credit policy of the company.
3. A large number of receivables remain due and outstanding.
4. The lesson links this to less profits and more chances of bad debts.
5. The other readings invert the indicator.
_Source: ICSI CS Executive Paper 8 (Financial and Strategic Management) — Lesson 1: Nature, Significance and Scope of Financial Management, pp. 6-20._
Related questions
The lesson defines Net Working Capital using a simple subtraction of two current items. WhThe lesson presents the undiscounted benefit-cost ratio as a project-evaluation criterion.The lesson, while endorsing the Quick Ratio for cash-position decisions, also flags a mainIn the EVA framework set out in the lesson, the "capital charge" is described as a specifiThe lesson critiques the pay back decision criterion on a specific structural ground. WhatThe lesson lists tools of analysis that underpin investment decisions. Which combination oThe lesson asks whether financial management is a science or an art, and gives a specific The lesson observes a tension between liquidity and profitability that the financial manag