Please answer.
Accounts Receivable Turnover and Average Collection Period The Longo Corporation disclosed the following financial information (in millions) in its recent annual report:
2012 | 2013 | |
---|---|---|
Net Sales | $138,073 | $152,732 |
Beginning Accounts Receivable (net) | 6,896 | 6,696 |
Ending Accounts Receivable (net) | 6,696 | 9,898 |
Calculate the accounts receivable turnover ratio for both years. (Round your answer to two decimal points.)
Calculate the average collection period for both years. (Use 365 days for calculation. Round to the nearest whole number.)
Is the company’s accounts receivable management improving or deteriorating?
2012 | 2013 | |
---|---|---|
a. Accounts receivable turnover | Answer | Answer |
b. Average collection period | Answer | Answer days |
c. The company’s receivable management | AnswerImprovedDeteriorated |
Expert Answer
2012 | 2013 | |
Accounts receivable turnover ratio = Net credit sales / Average accounts recievable | $138,073/(($6,896+$6,696)/2) = 20.32 | $152,732 / (($6,696+$9,898)/2) = 18.41 |
Average collection period = 365/Accounts Receiveble turnover ratio | 365 / 20.32 = 17.96 Days | 365 / 18.41 = 19.83 Days |
The company’s receivable management is deteriorated. becasue average collection period is increased