The correct answer is C. That Debtors Collection period has increased.
Working capital is the difference between a company’s current assets and its current liabilities. It is a measure of a company’s ability to meet its short-term obligations. A deterioration in working capital management means that a company is not managing its current assets and liabilities effectively. This can lead to a number of problems, including:
- Difficulty meeting short-term obligations
- Increased risk of bankruptcy
- Reduced profitability
One of the most important aspects of working capital management is managing the collection of receivables. Debtors collection period is the average number of days it takes a company to collect its receivables. A longer debtors collection period means that a company is not collecting its money as quickly as it should. This can lead to a number of problems, including:
- Increased bad debt expense
- Reduced cash flow
- Increased working capital requirements
Therefore, if there is a deterioration in the management of working capital of XYZ Ltd., it is most likely that the debtors collection period has increased. This means that XYZ Ltd. is not collecting its money as quickly as it should, which can lead to a number of problems.