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CS Executive · Corporate Accounting and Financial Management · Working Capital Management

In the context of receivables management, which of the following best describes the 'credit period' offered by a firm such as Sharda Textiles Ltd?

Credit period is the time allowed to customers to pay for goods bought on credit, usually counted from the invoice date. It is a core element of credit policy. Supplier payment delay and stock holding period are different concepts relating to payables and inventory.

  1. AThe time allowed to customers to pay for credit purchases, counted from the date of invoiceCorrect
  2. BThe time taken by the firm to collect cheques from the bank
  3. CThe period for which the firm can delay payment to its suppliers
  4. DThe period for which stock is held before being sold

Explanation

Credit period is the length of time customers are allowed before payment is due on credit sales, usually counted from the invoice date. Delay in paying suppliers relates to payables, and stock holding relates to inventory management.

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