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) $ 3,740 $ 4,610 Accounts receivable (net) 3,400 4,350 Allowance for doubtful accounts 340 260 Sales revenue 33,325 35,825 Total current assets 7,170 7,292 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

Answer 1

Accounts Receivable Turnover 8.6 times

Average collections period 42.44 days

Step-by-step explanation:

A. Calculation to determine the average collection period for 2022 using this formula

Accounts Receivable Turnover = Sales/Average accounts receivables

Let plug in the formula

Accounts Receivable Turnover = 33,325 /[(3,400+4350)/2]

Accounts Receivable Turnover =33,325/(7,750/2)

Accounts Receivable Turnover =33,325/3875

Accounts Receivable Turnover = 8.6 times

Therefore the Accounts Receivable Turnover will be 8.6 times

B. Calculation to determine the Average collections period using this formula

Average collections period = 365/Accounts Receivable Turnover

Let plug in the formula

Average collections period= 365/8.6

Average collections period= 42.44 days

Therefore The Average collections period will be 42.44 days