(a)
Accounts receivable turnover
Accounts receivable turnover is a liquidity measure of accounts receivable in times, which is calculated by dividing the net credit sales by the average amount of net accounts receivables. In simple, it indicates the number of times the average amount of net accounts receivables has been collected during a particular period.
Average collection period:
Average collection period indicates the number of days taken by a business to collect its outstanding amount of accounts receivable on an average.
To calculate: The average accounts receivable turnover of Company H and Incorporation L.
(b)
To identify: Whether Company H or Incorporation L has the higher average accounts receivable turnover ratio.
(c)
To explain: The reason for the difference in average accounts receivable turnover ratio between Company H and Incorporation L.
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