Question

In: Accounting

The following information pertains to Ortiz Company. Assume that all balance sheet amounts represent both average...

The following information pertains to Ortiz Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.

Assets

Cash and short-term investments

$ 45,000

Accounts receivable (net)

30,000

Inventory

20,000

Property, plant and equipment

210,000

Total Assets

$305,000

Liabilities and Stockholders' Equity

Current liabilities

$ 50,000

Long-term liabilities

95,000

Stockholders' equity—common

160,000

Total Liabilities and Stockholders' Equity

$305,000

Income Statement

Sales

$ 110,000

Cost of goods sold

66,000

Gross profit

54,000

Operating expenses

30,000

Net income

$ 14,000

Number of shares of common stock

6,000

Market price of common stock

$20

Dividends per share

.50


What is the accounts receivable turnover for Ortiz?

Solutions

Expert Solution

Accounts receivable turnover is an efficiency ratio or activity ratio that measures how many times a business can turn its accounts receivable into cash during a period. In other words, the accounts receivable turnover ratio measures how many times a business can collect its average accounts receivable during the year
Account Receivable turnover ratio = Credit sale       110,000
Average receivable         30,000
Account Receivable turnover ratio =                  110,000
                   30,000
Account Receivable turnover ratio =                      3.67 times
Note:- As mention in the question the given accounts receivable are assumed to be average accounts receivable and entire sales is credit sales

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