Question

Last year, Ace Electronics had credit sales of $1,500,000. The average accounts receivable balance last year was $250,000. What was the receivables turnover ratio for Ace Electronics last year?

Answer 1

6 times

Step-by-step explanation:

The formula and the computation of the receivables turnover ratio is shown below:

Account receivable turnover ratio = (Credit sales) ÷ (Average accounts receivable balance)

= ($1,500,000) ÷ ($250,000)

= 6 times

We simply divided the credit sales by the average account receivable balance so that the receivables turnover ratio could arrive