Question

Beverage International reports net credit sales for the year of $312,000. The company's accounts receivable balance at the beginning of the year equaled $39,000 and the balance at the end of the year equaled $49,000. What is Beverage International's receivables turnover ratio? (Round your answer to one decimal place.)

Answer 1

Accounts Receivables Turnover Ratio =
`(312,000)/(44,000) = 7.091`

Step-by-step explanation:

Accounts Receivables Turnover Ratio =
`(Net \:Credit \:Sales)/(Average \:Accounts \:Receivables)`

Here we are provided,

Net Credit sales for the year = $312,000

Accounts Receivables opening balance = $39,000

Accounts Receivables Closing Balance = $49,000

Average balance of Accounts Receivables =
`(39,000 \:+ \:49,000)/(2) = 44,000`

Accounts Receivables Turnover Ratio =
`(312,000)/(44,000) = 7.091`

This ratio is used to assess the effectiveness of a company in collecting it's debts, and how much credit shall be given.