You are a Management Accountant working at the head office of LGO, a large manufacturing organisation. LGO has several divisions which produce different ranges of products. You are reviewing the management reports submitted by divisions and have calculated some liquidity ratios to compare two divisions, N and S. The ratios are as follows: Divisions Liquidity ratios N S Trade payable days 48.5 56.6 Trade receivable days 34.2 31.8 Inventory holding days 63.5 42.8 Working capital cycle days 49.2 28.5 Based on these figures, 

which of THREE statements are correct? Solution 

A.S must be making more sales than N as their payables days ratio is higher.

B.There must be an error in the calculations for S.

C. N must have a more efficient inventory holding system than S. 

D.N is more likely to have liquidity problems than S.

E.Trade receivable days could be improved by invoicing promptly