menu
bartleby
search
close search
Hit Return to see all results
close solutoin list

Accounts receivable analysis The following data are taken from the financial statements of Sigmon Inc. Terms of all sales are 2/10, n/45. a. For 20Y2 and 20Y3, determine (1) the accounts receivable turnover and (2) the number of days’ sales in receivables. Round to the nearest dollar and one decimal place. b. What conclusions can be drawn from these data concerning accounts receivable and credit policies?

BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

Solutions

Chapter
Section
BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 17, Problem 9E
Textbook Problem
3 views

Accounts receivable analysis

The following data are taken from the financial statements of Sigmon Inc. Terms of all sales are 2/10, n/45.

Chapter 17, Problem 9E, Accounts receivable analysis The following data are taken from the financial statements of Sigmon

  1. a. For 20Y2 and 20Y3, determine (1) the accounts receivable turnover and (2) the number of days’ sales in receivables. Round to the nearest dollar and one decimal place.
  2. b. What conclusions can be drawn from these data concerning accounts receivable and credit policies?

(a)

To determine

Compute: (1) Accounts receivable turnover ratio and (2) number of days’ sales in receivables

Explanation of Solution

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

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.

Formula:

Accounts receivables turnover ratio}=Net credit salesAverage accounts receivables

Average collection period is used to determine the number of days a particular company takes to collect accounts receivables.

Formula:

 Number of days’ sales in receivable=Average accounts receivable Average daily sales

(1)

Compute accounts receivable turnover ratio for 20Y3.

Accounts receivables turnover ratio}=Net credit salesAverage accounts receivables=$5,637,500$687,500=8.2

Compute accounts receivable turnover ratio for 20Y2.

Accounts receivables turnover ratio}=Net credit salesAverage accounts receivables=$4,687,500$625,000=7.5

Working notes:

Average accounts receivables are determined as below:

Average accounts receivables for 20Y3

Average accounts receivables = (Opening accounts receivables + Closing accounts receivables2)=$725,000+$650,0002=$687,5

(b)

To determine

Provide conclusion about accounts receivables and credit policies. 

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Chapter 17 Solutions

Financial Accounting
Show all chapter solutions
add
Ch. 17 - Horizontal analysis The comparative temporary...Ch. 17 - Horizontal analysis The comparative accounts...Ch. 17 - Vertical analysis Prepare a vertical analysis of...Ch. 17 - Vertical analysis Income statement information for...Ch. 17 - Current position analysis The following items are...Ch. 17 - Current position analysis The following items are...Ch. 17 - Accounts receivable analysis A company reports the...Ch. 17 - Accounts receivable analysis A company reports the...Ch. 17 - Inventory analysis A company reports the...Ch. 17 - Inventory analysis A company reports the...Ch. 17 - Long-term solvency analysis The following...Ch. 17 - Long-term solvency analysis The following...Ch. 17 - Times interest earned A company reports the...Ch. 17 - Times interest earned A company reports the...Ch. 17 - Asset turnover A company reports the following:...Ch. 17 - Asset turnover A company reports the following:...Ch. 17 - Return on total assets A company reports the...Ch. 17 - Return on total assets A company reports the...Ch. 17 - Common stockholders' profitability analysis A...Ch. 17 - Common stockholders' profitability analysis A...Ch. 17 - Earnings per share and price-earnings ratio A...Ch. 17 - Earnings per share and price-earnings ratio A...Ch. 17 - Vertical analysis of income statement Revenue and...Ch. 17 - Vertical analysis of income statement The...Ch. 17 - Common-sized income statement Revenue and expense...Ch. 17 - Vertical analysis of balance sheet Balance sheet...Ch. 17 - Horizontal analysis of the income statement Income...Ch. 17 - Current position analysis The following data were...Ch. 17 - Current position analysis PepsiCo, Inc., the...Ch. 17 - Current position analysis The bond indenture for...Ch. 17 - Accounts receivable analysis The following data...Ch. 17 - Accounts receivable analysis Xavier Stores Company...Ch. 17 - Inventory analysis The following data were...Ch. 17 - Inventory analysis QT, Inc. and Elppa Computers,...Ch. 17 - Ratio of liabilities to stockholders equity and...Ch. 17 - Ratio of liabilities to stockholders equity and...Ch. 17 - Ratio of liabilities to stockholders equity and...Ch. 17 - Asset turnover Throe major segments of the...Ch. 17 - Profitability ratios The following selected data...Ch. 17 - Profitability ratios Ralph Lauren Corporation...Ch. 17 - Six measures of solvency or profitability The...Ch. 17 - Five measures of solvency or profitability The...Ch. 17 - Earnings per share, price-earnings ratio, dividend...Ch. 17 - Price-earnings ratio; dividend yield The table...Ch. 17 - Earnings per share, discontinued operations The...Ch. 17 - Income statement and earnings per share for...Ch. 17 - Unusual items Explain whether Colston Company...Ch. 17 - Horizontal analysis of income statement For 20Y2,...Ch. 17 - Vertical analysis of income statement For 20Y2,...Ch. 17 - Effect of transactions on current position...Ch. 17 - Measures of liquidity, solvency, and profitability...Ch. 17 - Solvency and profitability trend analysis Addai...Ch. 17 - Horizontal analysis of income statement For 20Y2,...Ch. 17 - Vertical analysis of income statement For 20Y2,...Ch. 17 - Effect of transactions on current position...Ch. 17 - Measures of liquidity, solvency and profitability...Ch. 17 - Solvency and profitability trend analysis Crosby...Ch. 17 - Financial statement analysis The financial...Ch. 17 - Ethics in Action Rodgers Industries Inc. completed...Ch. 17 - Communication The president of Freeman Industries...Ch. 17 - Performing vertical analysis The Roost Department...Ch. 17 - Profitability analysis Deere Company manufactures...Ch. 17 - The average liabilities, average stockholders'...

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions add
COST OF PREFERRED STOCK Tunney Industries can issue perpetual preferred stock at a price of 47.50 a share. The ...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)