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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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Comparative Analysis: Under Armour, Inc., versus Columbia Sportswear

Refer to the 10-K reports of Under Armour, Inc., and Columbia Sportswear that are available for download from the companion website at CengageBrain.com.

Required:

Using the balances reported on the balance sheets, what are Under Armour’s and Columbia’s receivables turnover for 2016? ( Note: Round answer to two decimal places.)

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 for 2016 from the balances indicated in the balance sheet of Under Armour and Columbia Sportswear.

Explanation

The net sales and beginning and ending balance of accounts receivables of Under Armour has been taken from the Cengagebrain.com website. The net sales of Under Armour for 2016 is 4825335000. The beginning balance which is the December 31st 2015 balance of accounts receivable is 433638000 and the ending balance on December 31st 2016 is 622685000. Now the accounts receivable turnover ratio is calculated using the following formula:

Accounts receivable turnover ratio for 2016

= Net sales / Average net accounts receivable

= 4825335000 / (433638000 + 622685000) / 2

= 4825335000 / 528161500 = 9.14

The net sales and beginning and ending balance of accounts receivables of Columbia Sportswear has been taken from the Cengagebrain...

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