Question

Net credit sales for Winner Company are $100,000 for the year. The Accounts Receivable account had a balance of $15,000 at the beginning of the year and $25,000 at the end of the year. What is the company's receivables turnover ratio?

A) 2.0
B) 5.0
C) 4.0
D) 0.2

Answer 1

The company's receivables turnover ratio is 5.0.

Step-by-step explanation:

The accounts receivable turnover ratio measures the efficiency of a company in collecting its accounts receivable. It is calculated by dividing the net credit sales by the average accounts receivable. In this case, the net credit sales are $100,000 and the average accounts receivable can be calculated as follows:

Average accounts receivable = (Beginning accounts receivable + Ending accounts receivable) / 2

= ($15,000 + $25,000) / 2

= $20,000

Now, we can calculate the receivables turnover ratio:

Receivables turnover ratio = Net credit sales / Average accounts receivable

= $100,000 / $20,000

= 5.0

Therefore, the company's receivables turnover ratio is 5.0.