Question

Accounts Receivable Analysis A company reports the following: Sales $1,500,000 Average accounts receivable (net) 100,000 Determine (a) the accounts receivable turnover and (b) the number of days' sales in receivables. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume a 365-day year. a. Accounts receivable turnover b. Number of days' sales in receivables days

Answer 1

Answer:

A) The account receivables turnover is 15, and B) the number of days sales in receivables is 24.3 days.

Explanation:

A) FORMULA FOR ACCOUNT RECEIVABLES TURNOVER =

NET SALES   /   AVERAGE ACCOUNT RECEIVABLES

Given information -

Net sales = $1500,000

Average account receivables = $100,000

Putting the values in formula -

= $1500,000  /   $100,000

= 15

B) FORMULA FOR NUMBER OF DAYS SALES IN RECEIVABLES =

365 / ACCOUNT RECEIVABLES TURNOVER

= 365 / 15

= 24.3 DAYS