Question

Explain the chart below:

		2016	2017
Net Sales		$   135,987,000.00	$   177,866,000.00
Beginning Accounts Receivable		$       5,654,000.00	$       8,339,000.00
Ending Accounts Receivable		$       8,339,000.00	$     13,164,000.00
Average Accounts Receivable	(Beginning Accounts Receivable + Ending Accounts Receivable) / 2	$      6,996,500.00	$    10,751,500.00
Average Collection Period	(Average Accounts Receivable * 365 days) / Net sales	$                      18.78	$                      22.06

Answer 1

	2016	2017
Net Sales=(A)	$ 13,59,87,000.00	$           17,78,66,000.00
Beginning Accounts Receivable	$       56,54,000.00	$                 83,39,000.00
Ending Accounts Receivable(Including Note)	$       83,39,000.00	$             1,31,64,000.00
Average Accounts Receivable=(Beginning Accounts Receivable+Ending Accounts Receivable/2)=($5654000+$8339000)/2,($8339000+$13164000)/2=(B)	$       69,96,500.00	$             1,07,51,500.00
Accounts Receivable Turnover=Sales/Average accounts receivable=(A)/(B)	19.44	16.54	Times
Average collection period=(365/Accounts receivable turnover)
(365/19.44),(365/16.54)	18.78	22.06	Days
In this case Average collection period is increased in 2017,due to various reasons:-
1) More credit to customers for longer period.
2) Less efforts will be taken for collect amount from customers.