Why did trade receivables increase significantly in 2025?

• A. Up £1.5m (40.9%) to £5.2m. Due to timing of events near year-end and more generous credit terms offered to secure bookings.
• B. Due to a decrease in revenue
• C. Because of payment delays from a single client
• D. Due to currency fluctuations

Answer: (A)

Trade receivables rise when bills sent to customers aren’t yet paid and the timing of when revenue is recognized pushes more amounts into customers’ unpaid balances. If a business pushes bookings into the year-end and offers looser credit terms to secure those orders, more sales are invoiced on credit and cash collections are spread over a longer period. That combination directly boosts the outstanding receivable balance, which is exactly what a 40.9% increase to £5.2m suggests.

The other options don’t fit the pattern as well. A drop in revenue would typically shrink receivables, not expand them. A delay from a single client could increase receivables but usually isn’t enough to explain a large, broad rise. Currency fluctuations would affect receivables only if foreign-denominated balances were involved, which isn’t indicated here.