Question

Bria Clothing Store had a balance in the Accounts Receivable account of $920,000 at the beginning of the year and a balance of $980,000 at the end of the year. Net credit sales during the year amounted to $7,600,000. The receivables turnover ratio was

7.8 times.

8.3 times.

8.4 times.

8.0 times.

Answer 1

8.0 times.

Step-by-step explanation:

Receivable Turnover ratio measures the number of times a business collect cash from its average receivables.

Average receivable = ( Receivable at beginning of the year + Receivable at the end of the year ) / 2

Average receivable = ( 920,000 + 980,000 ) / 2 = 1,900,000 / 2

Average receivable = $950,000

Receivable Turnover ratio = Net Credit Sales / Average Receivable

Receivable Turnover ratio = 7,600,000 / $950,000 = 8 times