Question

Below are amounts (in millions) from three companies' annual reports. Beginning Accounts Receivable Ending Accounts Receivable Net Sales WalCo $ 1,745 $ 2,692 $ 315,427 TarMart 5,816 6,344 60,878 CostGet 559 595 61,963 Required: 1. Calculate the receivables turnover ratio and the average collection period for WalCo, TarMart and CostGet. (Do not round intermediate calculations. Enter your answers in millions. Round your "Average accounts receivable" and "Receivables turnover ratio" answers to one decimal place.)

Answer 1

Answer:

The receivables turnover is 71.1 times for Walco,5.0 times for TarMat and 53.7 times CostGet

The average collection period for Walco is 5.1 days,73.0 days for TarMart and 6.8 days for CostGet

Explanation:

The formula for receivables turnover is net credit sales divided average receivables

                                                   Walco            TarMart           CostGet

Receivables turnover

$315,427/($1745+$2692)         71.1

$60,878/($5816+$6344)                                  5.0

$61,963/($559+$595)                                                             53.7

Average collection period

=365/receivables turnover

365/71.1                                  5.1 days

365/5.0                                                            73 days

365/53.7                                                                                6.8 days