# What are the two most common receivables ratios, and what do these ratios tell a stakeholder about the company?

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 9, Problem 13Q
Textbook Problem
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## What are the two most common receivables ratios, and what do these ratios tell a stakeholder about the company?

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 indicate:

The two most common receivable ratios and their purpose.

### Explanation of Solution

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...

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