Question

Accounts Receivable Turnover and Days' Sales in Receivables

Quasar, Inc. sells clothing, accessories, and personal care products for men and women through its retail stores. Quasar reported the following data for two recent years:

	Year 2		Year 1
Sales	$3,798,190		$3,843,450
Accounts receivable	321,200		306,600

Assume that accounts receivable were $350,400 at the beginning of Year 1.

a. Compute the accounts receivable turnover for Year 2 and Year 1. Round to one decimal place.

Year 2:
Year 1:

b. Compute the days' sales in receivables for Year 2 and Year 1. Round interim calculations and final answers to one decimal place. Use 365 days per year in your calculations.

Year 2:	days
Year 1:	days

c. c. The change in accounts receivable turnover from year 1 to year 2 indicates a(n) --------------- in the efficiency of collecting accounts receivable and is a(n) ---------- change. The change in the days' sales in receivables indicates a(n) ------------------- change.​

Answer 1

a)

Accounts receivable turnover ratio = Net credit sales / Average accounts recievable

	Year 2	Year 1
Sales	$                                              3,798,190	$                                              3,843,450
Average accounts receivable	($321,200+$306,600)/2 = $313,900	($306,600+$350,400)/2 = $328,500
Accounts receivable turnover ratio	12.1	11.7

b)

Days outstanding for accounts receivable = Average accounts receivable / (Annual sales / 365)

	Year 2	Year 1
Average accounts receivable	($321,200+$306,600)/2 = $313,900	($306,600+$350,400)/2 = $328,500
Sales	$                                              3,798,190	$                                              3,843,450
Days outstanding for accounts receivable	30.2	31.2