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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Accounts receivable analysis

A company reports the following:

Sales $4,000,000
Average accounts receivable (net) 200,000

Determine (a) the accounts receivable turnover and (b) the number of days’ sales in receivables. Round to one decimal place.

a)

To determine

Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.

To compute: Accounts receivable turnover ratio

Given info: Sales and average accounts receivable.

Explanation

Accounts receivables turnover ratio is mainly used to evaluate the collection process efficiency. It helps the company to know the number of times the accounts receivable is collected in a particular time period. Main purpose of accounts receivable turnover ratio is to manage the working capital of the company. This ratio is determined by dividing credit sales and sales return...

b)

To determine

To compute: Number of days’ sales in receivable

Given info: Sales and average accounts receivable.

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