Question

potaw company reported the following data at the end of 2022: sales revenue (75% on credit) $ 480,000 expenses (26% on credit) 78,000 accounts receivable, net at december 31, 2022 (a decrease of $13,000 during 2022) 17,000 total assets 380,000 stockholders' equity 170,000 what was the accounts receivable turnover ratio?

Answer 1

The accounts receivable turnover ratio is a measure of a company's efficiency in collecting payments from its customers. It indicates how many times, on average, the company collects its accounts receivable during a specific period. To calculate the accounts receivable turnover ratio, divide the net credit sales by the average accounts receivable.

Step-by-step explanation:

The accounts receivable turnover ratio is a measure of a company's efficiency in collecting payments from its customers. It indicates how many times, on average, the company collects its accounts receivable during a specific period.

To calculate the accounts receivable turnover ratio, you divide the net credit sales by the average accounts receivable. Net credit sales can be calculated by subtracting the cash sales from the total sales revenue. In this case, the net credit sales would be 75% of the total sales revenue ($480,000 x 75% = $360,000).

The average accounts receivable can be calculated by adding the beginning and ending accounts receivable and dividing by 2. Since we only have the ending accounts receivable, we can assume that the beginning accounts receivable is equal to the ending accounts receivable plus the decrease ($17,000 + $13,000 = $30,000).

Therefore, the accounts receivable turnover ratio would be $360,000 / $30,000 = 12. This means that the company collects its accounts receivable 12 times during the year.