Which of the following is likely to increase the trade

Solution

As an isolated factor, an increase in the volume of credit sales will not affect the trade receivables collection period, as it also increases the trade receivables in that proportion. Loose credit control will increase the collection period if the credit policy allows longer credit, or reduced collection efforts. Application of effective credit controls is likely to reduce the trade receivables collection period.  If a significant discount is offered to credit customers, they are likely to take advantage of this, which will reduce the trade receivables collection period.  The period taken to pay trade payables will not affect the trade receivables collection period.