Question #51
Reading: Reading 12 Evaluating Quality of Financial Reports
PDF File: Reading 12 Evaluating Quality of Financial Reports.pdf
Page: 47
Status: Unattempted
Correct Answer: A
Question
Pysha Heavy Metals Ltd. supplies specialized metals to the chip fabrication industry. Selected financial data for Pysha, as well as industry comparables, are shown below: Pysha selected financial data (GBP '000s): 20x7 20x8 20x9 Sales 1,169 1,312 1,414 Accounts receivable 58.45 72.16 98.98 Industry average: 20x7 20x8 20x9 DSO 22.6 22.8 22.4 Receivables turnover 16.2 16.0 16.3 Based on the trend in revenues and receivables, it can be most accurately concluded that:
Answer Choices:
A. Pysha’s revenues are growing at a slower rate than its receivables
B. Pysha’s revenues are growing at a faster rate than its receivables
C. The revenue growth rate divided by receivables growth rate is increasing over time
Explanation
Pysha's revenue growth rate is lagging the receivables growth rate.
20x7
20x8
20x9
Revenue growth
-
12.23%
7.77%
Receivable growth
-
23.46%
37.17%
Ratio
52.15%
20.92%