Question

Consider the following information: Year 2 Year 1 Accounts receivable $ 88,000 $ 80,000 Merchandise inventory 66,000 80,000 Net sales 408,000 380,000 Cost of goods sold 248,000 228,000 What is the Year 2 receivables turnover ratio for Year 2

Answer 1

Explanation: Actually you take the average of the two years 88,000 + 80,000 and divide it by 2 (two years present)=84,000. You then take the net sales for that year 2 408,000 and divide it by 84,000 (the average of the two years) and get 4.857

Answer 2

The Year 2 receivables turnover ratio for Year 2 is 4.64 times

Step-by-step explanation:

The accounts receivable turnover is an efficiency ratio that measures how many times a company can collect its receivables or money owed by clients during the year.

Accounts receivable turnover is calculated by following formula:

Accounts Receivable Turnover = Net Credit Sales /Average Accounts Receivable

In Year 2, Accounts receivable is $88,000, Net sales is $408,000

Accounts Receivable Turnover ratio = $408,000/$88,000 = 4.64 times