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 accounts receivable turnover for Year 1 and Year 2.

Question

Apple Inc. designs, manufactures, and markets personal computers and related personal computing and communicating solutions for sale primarily to education, creative, consumer, and business customers. Substantially all of the company's sales over the last five years are from sales of its Macs, iPods, iPads, and related software and peripherals. For two recent fiscal years, Apple reported the following (in millions): Year 2 Year 1 Sales $233,715 $182,795 Accounts receivable at end of year 35,889 31,537 Assume that the accounts receivable (in millions) were $24,094 at the beginning of fiscal Year 1. 1. Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places. 2. Compute the days' sales in receivables at the end of Year 2 and Year 1. Use 365 days and round to one decimal place. What conclusions can be drawn from (1) and (2) regarding Apple's efficiency 3. in collecting receivables?

Answer 1

Question

Chapter 8, Problem 8.4CP

(a)

To determine

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 accounts receivable turnover for Year 1 and Year 2.

(b)

To determine

To calculate: The day’s sales in receivables at the end of Year 1 and Year 2.

(c)

To determine

To conclude: The Efficiency of Incorporation A’s management in collecting accounts receivables.

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Apple Inc. designs, manufactures, and markets personal computers and related personal computing and communicating solutions for sale primarily to education, creative, consumer, and business customers. Substantially all of the company's sales over the last five years are from sales of its Macs, iPods, iPads, and related software and peripherals. For two recent fiscal years, Apple reported the following (in millions): Year 2 Year 1 Sales $233,715 $182,795 Accounts receivable at end of year 35,889 31,537 Assume that the accounts receivable (in millions) were $24,094 at the beginning of fiscal Year 1. 1. Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places. 2. Compute the days' sales in receivables at the end of Year 2 and Year 1. Use 365 days and round to one decimal place. What conclusions can be drawn from (1) and (2) regarding Apple's efficiency 3. in collecting receivables?

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