For this ACCA AFM & FM blog,let’s look at debts !
This is debts owed to the company. Money owed from customers. Receivables management.
For FM students, this is a key topic. Certainly one of the most tested across all three sections.
As far as the objective test questions are concerned, it’s mainly about settlement discounts & the APR calculation. The examiners like this a lot.
For the Section C it’s the substantial theory combined with the classic requirement – evaluation of a change in the receivables policy.
The former is solved for all students by my ACCA FM TheoryWise notes & podcasts – theory subsumed!
The calculations need one approach – to compute the gain or loss in annual cash flows from the ‘old’ to ‘new’ policy. Use a linear approach on the ACCA spreadsheet.
Have a working for the change in finance costs. I recommend the method of stating old vs new:
1) Receivables Days
2) Receivables Value
3) Finance Cost
This keeps things simple.
Know your receivables management well & your prospects of passing ACCA FM will be far greater.