Asked by Blake cannistraro on Jun 29, 2024
Verified
A company reports the following:
Sales..............................................................$720,000
Average accounts receivable (net)................45,000?
Determine the (a) accounts receivable turnover and (b) number of days' sales in receivables. Round your answers to onedecimal place.
Accounts Receivable Turnover
A financial ratio that measures how frequently a company collects its average accounts receivable balance in a period.
Days' Sales
A measure of the average number of days it takes a company to collect revenue after a sale has been made, often used in understanding liquidity.
Average Accounts Receivable
The average amount of money owed to a company by its customers over a specific period.
- Calculate and elucidate principal financial ratios, which include the current ratio, quick ratio, inventory turnover, accounts receivable turnover, and times interest earned.
Verified Answer
JR
Jordan RichardsonJul 05, 2024
Final Answer :
(a)Accounts Receivable Turnover = Sales/Average Accounts ReceivableAccounts Receivable Turnover = $720,000/$45,000Accounts Receivable Turnover = 16.0
(b)Number of Days' Sales in Receivables = Average Accounts Receivable/Average DailySalesNumber of Days' Sales in Receivables = $45,000/
($720,000/365)Number of Days' Sales in Receivables = 22.8
(b)Number of Days' Sales in Receivables = Average Accounts Receivable/Average DailySalesNumber of Days' Sales in Receivables = $45,000/
($720,000/365)Number of Days' Sales in Receivables = 22.8
Learning Objectives
- Calculate and elucidate principal financial ratios, which include the current ratio, quick ratio, inventory turnover, accounts receivable turnover, and times interest earned.