Final Answer:
The receivables turnover for Dahlia Corp. is approximately 9.68. The days' sales in receivables for the company is approximately 37.69 days.
Step-by-step explanation:
Receivables turnover is a financial ratio used to assess how efficiently a company manages its accounts receivable by measuring the number of times during a period that a company collects its average accounts receivable balance. It is calculated by dividing the total credit sales by the average accounts receivable balance. In this case, the receivables turnover for Dahlia Corp. is calculated as $4,986,340 / $513,260 ≈ 9.68. This indicates that, on average, Dahlia Corp. turns over its accounts receivable approximately 9.68 times during the year.
Days' sales in receivables, also known as the average collection period, represents the average number of days it takes for a company to collect payment after a sale has been made. It is calculated by dividing the number of days in a period by the receivables turnover. In this instance, the days' sales in receivables for Dahlia Corp. is computed as 365 days (representing a year) divided by the receivables turnover of 9.68, resulting in approximately 37.69 days. This implies that, on average, it takes approximately 37.69 days for Dahlia Corp. to collect payments from its credit sales.
These financial metrics, the receivables turnover, and days' sales in receivables, are vital for assessing a company's effectiveness in managing its accounts receivable. A higher receivables turnover indicates more efficient management of receivables, while a shorter days' sales in receivables implies quicker collection of outstanding payments, both of which are favorable indicators of a company's financial health and efficiency.