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# Starlight Enterprises has net credit sales for 2019 in the amount of $2,600,325, beginning accounts receivable balance of$844,260, and an ending accounts receivable balance of $604,930. Compute the accounts receivable turnover ratio and the number of days’ sales in receivables ratio for 2019 (round answers to two decimal places). What do the outcomes tell a potential investor about Starlight Enterprises if the industry average is 1.5 times and the number of days’ sales ratio is 175 days? FindFindarrow_forward ### Principles of Accounting Volume 1 19th Edition OpenStax Publisher: OpenStax College ISBN: 9781947172685 #### Solutions Chapter Section FindFindarrow_forward ### Principles of Accounting Volume 1 19th Edition OpenStax Publisher: OpenStax College ISBN: 9781947172685 Chapter 9, Problem 10EB Textbook Problem 3 views ## Starlight Enterprises has net credit sales for 2019 in the amount of$2,600,325, beginning accounts receivable balance of $844,260, and an ending accounts receivable balance of$604,930. Compute the accounts receivable turnover ratio and the number of days’ sales in receivables ratio for 2019 (round answers to two decimal places). What do the outcomes tell a potential investor about Starlight Enterprises if the industry average is 1.5 times and the number of days’ sales ratio is 175 days?

To determine

Concept introduction:

Accounts receivable turnover ratio:

This is an efficiency ratio that indicates the conversion of accounts receivable into cash. This ratio is calculated by dividing the Net credit Sales by the Average accounts receivable. The formula to calculate this ratio is as follows:

Accounts receivable turnover ratio = Net credit SalesAverage accounts receivable

Days Sales uncollected:

This isan efficiency ratio that indicates the period for which credit sales remain as receivable. The ratio is calculated by multiplying Accounts receivable with 365 days and dividing the result by Net Sales. The formula for Days Sales uncollected is as follows:

Days Sales uncollected = Accounts Receivable ×365Net Sales

To calculate:

The Accounts receivable turnover ratio and Days sales in receivable and indicate the outcomes for potential investors.

### Explanation of Solution

The Accounts receivable turnover ratio and Days sales in receivable are calculated as follows:

 Particulars Year 2019 Net Credit Sales (A) $2,600,325 Beginning Accounts Receivable (B)$844,260 Ending Accounts Receivable (C) \$604,930 Average Accounts Receivabl...

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