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ACCA Applied Skills · Financial Management · Management of inventories, accounts receivable, accounts payable and cash

A company wants to assess the creditworthiness of a new customer before granting credit. Which of the following is the least useful source of information for this purpose?

The company's own budgeted sales figure is the least useful source. Credit assessment relies on information about the customer, such as bank and trade references and its financial statements, not on the seller's internal sales forecasts.

  1. AA bank reference
  2. BTrade references from other suppliers
  3. CThe customer's recent published financial statements
  4. DThe company's own budgeted sales for next yearCorrect

Explanation

Bank references, trade references and the customer's financial statements all give evidence of the customer's ability and record of paying. The seller's own budgeted sales say nothing about the customer's credit standing.

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