Final answer:
To determine the receivables turnover ratio and average collection period for Walco, Tarmart, and Costget, the formula for the receivables turnover ratio (Net Sales / Average Accounts Receivable) and the subsequent calculation for the average collection period (365 / Receivables Turnover Ratio) are used. This results in Walco having a collection period of 2.59 days, Tarmart 34.56 days, and Costget 3.42 days.
Step-by-step explanation:
The student is asking for assistance in calculating the receivables turnover ratio and the average collection period for three companies: Walco, Tarmart, and Costget. To calculate these, we will use the given beginning and ending accounts receivable amounts as well as the net sales figures for each company.
To calculate the receivables turnover ratio, we use the formula: Receivables Turnover Ratio = Net Sales / Average Accounts Receivable. The average accounts receivable is calculated by taking the sum of the beginning and ending accounts receivable balances, divided by 2.
The average collection period is then found by dividing 365 days by the receivables turnover ratio. This will give us the average number of days it takes for a company to collect its receivables.
Calculations for Walco:
Average Accounts Receivable = ($1,815 million + $2,762 million) / 2 = $2,288.5 million
Receivables Turnover Ratio = $322,427 million / $2,288.5 million = 140.93
Average Collection Period = 365 / 140.93 = 2.59 days
Calculations for Tarmart:
Average Accounts Receivable = ($6,166 million + $6,694 million) / 2 = $6,430 million
Receivables Turnover Ratio = $67,878 million / $6,430 million = 10.56
Average Collection Period = 365 / 10.56 = 34.56 days
Calculations for Costget:
Average Accounts Receivable = ($629 million + $665 million) / 2 = $647 million
Receivables Turnover Ratio = $68,963 million / $647 million = 106.62
Average Collection Period = 365 / 106.62 = 3.42 days