Asked by Riley Lennon on Jun 17, 2024
Verified
A company reports the following:
Sales............................................................$1,200,000
Average accounts receivable (net)...............50,000?
Determine the (a) accounts receivable turnover and (b) number of days' sales in receivables. Round your answers to one decimal place.
Accounts Receivable Turnover
A financial ratio that measures how efficiently a company collects revenue from its credit sales, by dividing net credit sales by the average accounts receivable.
Days' Sales
An indicator of a company's efficiency in managing its inventory, it calculates the number of days it typically takes to sell the entire inventory.
Average Accounts Receivable
The mean value of accounts receivable over a given period, indicating the average amount owed to a company by its customers.
- Accomplish computations and provide interpretations for fundamental financial ratios, such as the current ratio, quick ratio, inventory turnover, accounts receivable turnover, and times interest earned.
Verified Answer
BC
Blanca CeciliaJun 21, 2024
Final Answer :
(a)Accounts Receivable Turnover = Sales/Average Accounts ReceivableAccounts Receivable Turnover = $1,200,000/$50,000Accounts Receivable Turnover = 24.0
(b)Number of Days' Sales in Receivables = Average Accounts Receivable/Average Daily SalesNumber of Days' Sales in Receivables = $50,000/
($1,200,000/365)Number of Days' Sales in Receivables = 15.2
(b)Number of Days' Sales in Receivables = Average Accounts Receivable/Average Daily SalesNumber of Days' Sales in Receivables = $50,000/
($1,200,000/365)Number of Days' Sales in Receivables = 15.2
Learning Objectives
- Accomplish computations and provide interpretations for fundamental financial ratios, such as the current ratio, quick ratio, inventory turnover, accounts receivable turnover, and times interest earned.