Question

Below are amounts for two companies: 19 Beginning Accounts Receivable (net) $2,100 3,109 Ending Accounts Receivable (net) $1,800 2,300 Company 1 Company 2 Net Sales $29,000 80,000 7 points 1. For each company, calculate the receivables turnover ratio. (Round your answers to 2 decimal places.) 02:11:14 Company 1 Company 2 Receivables Turnover Ratio times times 2. Which company appears more efficient in collecting cash from sales? Company 1 Company 2

Answer 1

Solution

	Accounts receivables Turnover ratio
Company 1	14.9	Times
Company 2	29.6	Times

.

Which company is more effiecient

Company 2

Working

	Company 1	Company 2
Beginning balance	$            2,100.00	$      3,100.00
Ending balance	$            1,800.00	$      2,300.00
Total	$            3,900.00	$      5,400.00
Average Receivables	$            1,950.00	$      2,700.00

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Accounts receivables Turnover ratio
	Net Credit Sales	/	Average Inventory	=	Accounts receivables Turnover ratio
Company 1	$         29,000.00	/	$         1,950.00	=	14.9	Times
Company 2	$         80,000.00	/	$         2,700.00	=	29.6	Times