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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Research and Analysis Using the Annual Report

Obtain Whirlpool’s Fiscal 2016 10-K (filed Feb. 13, 2017) through the "Investor Relations" portion of its website (do a web search for Whirlpool investor relations). Once at the Investor Relations section of the website, look for "SEC Filings" under the "FINANCIAL INFORMATION" header. When you see the list of all the filings, either filter for the "Annual Filings" or search for "10-K." Another option is to go to www.sec.gov and click "Company Filings Search" under "Filings."

Required:

Calculate Whirlpool’s receivables turnover for fiscal 2015 and 2016 (Accounts Receivable, net, was $2,768 at the end of fiscal 2014). ( Note: Round answers to two decimal places.) If the industry average for receivables turnover is 6.14, how do you evaluate their efficiency with receivables?

To determine

Concept introduction:

Accounts receivable turnover ratio:

Assets are an integral part of any business and they help the business to perform its day to day operations smoothly. Analysts often measure the asset management capability of business and the most commonly used asset management ratio is accounts receivable turnover ratio. This ratio is used to measure how many time the trade receivables are turned over in a period. The higher the ratio it is better because the company is able to turn majority of its inventory into cash.

Calculate accounts receivable turnover ratio of Whirlpool for 2015 and 2016. Determine the efficiency of Whirlpool with their receivables if the industry average is 6.14.

Explanation

The net sales and beginning and ending balance of accounts receivables of Whirlpool has been taken from the Sec.gov website. The net sales of Whirlpool for 2015 and 2016 is 20891 million and 20718 million respectively. The beginning balance of accounts receivable for 2015 is 2768 million and ending balance is 2530 million. The beginning balance of accounts receivable for 2016 is 2530 million and ending balance is 2711 million. Now the accounts receivable turnover ratio is calculated using the following formula:

Accounts receivable turnover ratio for 2015

= Net sales / Average net accounts receivable

= 20819 / (2768 + 2530) / 2

= 20718 / 2649 = 7...

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