FM syllabus

Past Exam Question

Specimen
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MC Question 8

The management of XYZ Co has annual credit sales of $20 million and accounts receivable of $4 million. Working capital is financed by an overdraft at 12% interest per year. Assume 365 days in a year.

What is the annual finance cost saving if the management reduces the collection period to 60 days?

A. $85,479
B. $394,521
C. $78,904
D. $68,384