(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 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 and average collection period of Company S for the year 2017.
(b)
To find out: whether accounts receivable is a material component of Company S’s current assets in 2017.
(c)
To discuss: The expected change in answer (a), if Company S sells seasonal products.
(d)
To evaluate: The credit risk of Company S’s concentrated receivables.
(e)
To comment: On the informational value of Company S’s Note 19.
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