Question

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?

Answer 1

		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