Determine (a) the accounts receivable turnover and (b) the number of days' sales in receivables. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume a 365-day year.

Accounts Receivable Analysis A company reports the following:

Net sales $1,272,390

Average accounts receivable (net) 60,590

a. Accounts receivable turnover

b. Number of days' sales in receivables days

Solutions

Expert Solution

The number of times a firm may sell its merchandise and collect payment from creditors is determined by its account receivable turnover ratio. The credit sales to average account receivable ratio is derived by dividing credit sales by the average account receivable.

Calculation of Accounts Receivable Turnover Ratio

Accounts Receivable Turnover Ratio = Sales/ Average account receivable

Accounts Receivable Turnover Ratio = $1,272,390/ 60,590

Accounts Receivable Turnover Ratio = 21 Times

Calculation of Day's Sales in Accounts Receivable

Days' Sales in Accounts Receivable = 365/ Accounts Receivable Turnover Ratio

Days' Sales in Accounts Receivable = 365/ 21

Days' Sales in Accounts Receivable = 17.38

Accounts Receivable Turnover Ratio = 21 Times

Days' Sales in Accounts Receivable = 17.38

balaji rao answered 2 years ago

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