Question & Answer: Accounts Receivable Turnover and Average Collection Period The Longo Corporation disclo…..

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

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