Question

In: Accounting

Determine (a) the accounts receivable turnover and (b) the number of days’ sales in receivables. Round to one decimal place

A company reports the following: Sales $960,000

Average accounts receivable (net) 48,000

Determine (a) the accounts receivable turnover and (b) the number of days’ sales in receivables. Round to one decimal place

Solutions

Expert Solution

These formulae can be used to calculate the accounts receivable turnover and the number of days' sales in receivables.

(a) Accounts Receivable Turnover = Sales / Average Accounts Receivable (b) Number of Days' Sales in Receivables = 365 days / Accounts Receivable Turnover

 

Given: Sales: $960,000 Average accounts receivable (net): $48,000

(a) Accounts Receivable Turnover: Accounts Receivable Turnover = Sales / Average Accounts Receivable = $960,000 / $48,000 = 20

Therefore, the accounts receivable turnover is 20.

(b) Number of Days' Sales in Receivables: Number of Days' Sales in Receivables = 365 days / Accounts Receivable Turnover = 365 days / 20 = 18.25

Therefore, the number of days' sales in receivables is 18.3 (rounded to one decimal place).

Therefore, the accounts receivable turnover is 20.

Therefore, the number of days' sales in receivables is 18.3 (rounded to one decimal place)

balaji rao answered 1 year ago
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