Concept explainers
(a)
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 other words, it indicates the number of times the average amount of net accounts receivables 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 of Company B for the year 2017.
(b)
To calculate: The average collection period of Company B for the year 2017.
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Financial Accounting: Tools for Business Decision Making, 8th Edition
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