Accounts receivable turnover and days' sales in receivablesBest Buy is a specialty retailer of consumer electronics, includingpersonal computers, entertainment software, and appliances. Best Buyoperates retail stores in addition to the Best Buy, Media Play, On Cue, andMagnolia Hi-Fi websites. For two recent years, Best Buy reported thefollowing (in millions): Year 2 Year 1 Sales $39,528 $40,339 Accounts receivable at end of year 1,162 1,280 Assume that the accounts receivable (in millions) were $1,308 at thebeginning of fiscal Year 1. 1. Compute the accounts receivable turnover for Year 2 and Year 1.Round to two decimal places.2. Compute the days' sales in receivables at the end of Year 2 andYear 1. Use 365 days and round to one decimal place. 3. What conclusions can be drawn from (1) and (2) regarding BestBuy's efficiency in collecting receivables?4. What assumption did we make about sales for the Best Buy ratiocomputations that might distort the ratios and therefore cause theratios not to be comparable for Year 2 and Year 1?
Best Buy is a specialty retailer of consumer electronics, including
personal computers, entertainment software, and appliances. Best Buy
operates retail stores in addition to the Best Buy, Media Play, On Cue, and
Magnolia Hi-Fi websites. For two recent years, Best Buy reported the
following (in millions):
| Year 2 | Year 1 | |
| Sales | $39,528 | $40,339 |
| Accounts receivable at end of year | 1,162 | 1,280 |
Assume that the accounts receivable (in millions) were $1,308 at the
beginning of fiscal Year 1.
1. Compute the accounts receivable turnover for Year 2 and Year 1.
Round to two decimal places.
2. Compute the days' sales in receivables at the end of Year 2 and
Year 1. Use 365 days and round to one decimal place.
3. What conclusions can be drawn from (1) and (2) regarding Best
Buy's efficiency in collecting receivables?
4. What assumption did we make about sales for the Best Buy ratio
computations that might distort the ratios and therefore cause the
ratios not to be comparable for Year 2 and Year 1?
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