Question

Suppose the following information was taken from the 2022 financial statements of FedEx Corporation, a major global transportation/delivery company.

(in millions) 2022 2021
Accounts receivable (gross) $ 3,720 $ 4,640
Accounts receivable (net) 3,350 4,350
Allowance for doubtful accounts 370 290
Sales revenue 36,575 39,075
Total current assets 7,190 7,252


Answer each of the following questions.

(a) Calculate the accounts receivable turnover and the average collection period for 2022 for FedEx. (Round answers to 1 decimal place, e.g. 12.5. Use 365 days for calculation.)

Accounts receivable turnover enter the accounts receivable turnover in times rounded to 1 decimal place times
The average collection period for 2022 enter the average collection period for 2022 in days rounded to 1 decimal place days

Answer 1

The accounts receivable turnover for FedEx in 2022 is 9.5 times, and the average collection period is approximately 38.4 days.

Step-by-step explanation:

To calculate the accounts receivable turnover for FedEx in 2022, we need to divide the sales revenue by the average accounts receivable. The average accounts receivable is calculated by taking the sum of the beginning and ending accounts receivable (net) and dividing by 2. The formula is as follows:

Accounts Receivable Turnover = Sales Revenue / Average Accounts Receivable

Using the numbers provided:

Average Accounts Receivable = (Accounts Receivable (net) 2022 + Accounts Receivable (net) 2021) / 2

= (3,350 + 4,350) / 2

= 3,850 million

Accounts Receivable Turnover = Sales Revenue / Average Accounts Receivable

= 36,575 / 3,850

= 9.5 times (rounded to 1 decimal place)

The average collection period represents how many days, on average, it takes the company to collect its accounts receivable. It is calculated by dividing 365 days by the accounts receivable turnover.

Average Collection Period = 365 / Accounts Receivable Turnover

= 365 / 9.5

= 38.4 days (rounded to 1 decimal place)