Question

Mathis and Hashey are two of the largest and most successful toymakers in the world, in terms of the products they sell and their receivables management practices. To evaluate their ability to collect on credit sales, consider the following information reported in their annual reports (amounts in millions). Mathis Hashey Fiscal Year Ended: 2015 2014 2013 2015 2014 2013 Net Sales $ 6,756 $ 6,331 $ 6,718 $ 5,002 $ 4,968 $ 4,822 Accounts Receivable 1,208 814 940 1,032 1,112 684 Allowance for Doubtful Accounts 26 29 30 35 37 36 Accounts Receivable, Net of Allowance 1,182 785 910 997 1,075 648 Required: Calculate the receivables turnover ratios and days to collect for Mathis and Hashey for 2015 and 2014. TIP: In your calculations, use average Accounts Receivable, Net of Allowance. (Use 365 days in a year. Do not round intermediate calculations on Accounts Receivable Turnover Ratio. Round your final answers to 1 decimal place. Use final rounded answers from Accounts Receivable Turnover Ratio for Days to Collect ratio calculation.)

Answer 1

The receivables turnover ratio and days to collect for Mathis and Hashey in 2015 and 2014.

Step-by-step explanation:

The receivables turnover ratio measures how quickly a company collects its accounts receivable. It is calculated by dividing net sales by the average accounts receivable, net of allowance. For Mathis in 2015, the receivables turnover ratio is 5.7 times, and it takes them approximately 64 days to collect on credit sales. For Hashey in 2015, the ratio is 4.9 times, and it takes them about 75 days to collect. In 2014, Mathis had a turnover ratio of 8 times and collected within 46 days, while Hashey had a ratio of 4.6 times and collected within 79 days.

Answer 2

Mathis: Accounts Receivable Turnover, 2014 = 7.5 times (Requirement B)

Accounts Receivable Turnover, 2015 = 6.9 times (Requirement A)

Days to collect, 2014 = 49 days (Requirement B)

Days to collect, 2015 = 53 days (Requirement A)

Hashey: Accounts Receivable Turnover, 2014 = 5.8 times (Requirement C)

Accounts Receivable Turnover, 2015 = 4.8 times (Requirement D)

Days to collect, 2014 = 63 days (Requirement C)

Days to collect, 2015 = 76 days (Requirement D)

Step-by-step explanation:

Requirement A)

We know,

Accounts Receivable Turnover = Net Credit Sales ÷ Average Accounts Receivable, Net of Allowance

Given,

For 2015 and for Mathis Company:

Net Credit Sales = $6,756

Average Accounts Receivable, Net of Allowance = (Beginning Accounts Receivable, Net of Allowance (2014) + Ending Accounts Receivable, Net of Allowance(2015)) ÷ 2 = $(785 + 1,182) ÷ 2 = $983.5

Therefore,

Accounts Receivable Turnover for 2015 and for Mathis Company =

$6,756 ÷ $983.5 = 6.9 times

Again,

We know, Days collection period = 365 days ÷ Accounts Receivable Turnover

or, Days collection period = 365 days ÷ 6.9 times = 53 days (Rounded to nearest day)

Requirement B)

Again, we know, Accounts Receivable Turnover = Net Credit Sales ÷ Average Accounts Receivable, Net of Allowance

Given,

For 2014 and for Mathis Company:

Net Credit Sales = $6,331

Average Accounts Receivable, Net of Allowance = (Beginning Accounts Receivable, Net of Allowance (2013) + Ending Accounts Receivable, Net of Allowance(2014)) ÷ 2 = $(910 + 785) ÷ 2 = $847.5

Therefore,

Accounts Receivable Turnover for 2014 and for Mathis Company =

$6,331 ÷ $847.5 = 7.5 times

Again,

We know, Days collection period = 365 days ÷ Accounts Receivable Turnover

or, Days collection period = 365 days ÷ 7.5 times = 49 days (Rounded to nearest day)

Requirement C)

For Hashey Corporation,

Accounts Receivable Turnover = Net Credit Sales ÷ Average Accounts Receivable, Net of Allowance

Given,

For 2014 and for Hashey Corporation:

Net Credit Sales = $4,968

Average Accounts Receivable, Net of Allowance = (Beginning Accounts Receivable, Net of Allowance (2013) + Ending Accounts Receivable, Net of Allowance(2014)) ÷ 2 = $(648 + 1,075) ÷ 2 = $861.5

Therefore,

Accounts Receivable Turnover for 2014 and for Mathis Company =

$4,968 ÷ $861.5 = 5.8 times

Again,

We know, Days collection period = 365 days ÷ Accounts Receivable Turnover

or, Days collection period = 365 days ÷ 5.8 times = 63 days (Rounded to nearest day)

Requirement D)

For Hashey Corporation,

Accounts Receivable Turnover = Net Credit Sales ÷ Average Accounts Receivable, Net of Allowance

Given,

For 2015 and for Hashey Corporation:

Net Credit Sales = $5,002

Average Accounts Receivable, Net of Allowance = (Beginning Accounts Receivable, Net of Allowance (2014) + Ending Accounts Receivable, Net of Allowance(2015)) ÷ 2 = $(1,075 + 997) ÷ 2 = $1,036

Therefore,

Accounts Receivable Turnover for 2015 and for Mathis Company =

$5,002 ÷ $1,036 = 4.8 times

Again,

We know, Days collection period = 365 days ÷ Accounts Receivable Turnover

or, Days collection period = 365 days ÷ 4.8 times = 76 days (Rounded to nearest day)