Accounting for IGCSE & O level - Advanced Principles (Section 7 - No. 16)
What is the impact of a reduction in the trade payables period?
It signals financial stability.
It may improve the business's credit rating.
It increases the cost of purchases.
It may cause the business to lose out on potential discounts.
Explanation
A reduction in the trade payables period suggests the company is paying suppliers more quickly. This could mean the business is unable to take advantage of the discounts offered to suppliers by paying invoices earlier.