Question

Return to questionItem 6Item 6 E8-16 Analyzing and Interpreting Receivables Turnover Ratio and Days to Collect [LO 8-4] FedEx Corporation reported the following rounded amounts (in millions): 2016 2015 Accounts Receivable $ 7,430 $ 5,905 Allowance for Doubtful Accounts (180 ) (185 ) Accounts Receivable, Net of Allowance $ 7,250 $ 5,720 Net Sales (assume all on credit) $ 50,370 $ 47,450 Required: Determine the receivables turnover ratio and days to collect for 2016. (Use 365 days in a year. Do not round intermediate calculations. Round your final answers to 1 decimal place.)

Answer 1

Solution and Explanation:

The following formulas will be used in order to calculate the accounts receivable turnover ratio and in order to find out the number of days collect.

Accounts receivable turnover ratio = Net sales divided by Average net Accounts receivable

`=\$ 50,370 /[(\$ 7,250+\$ 5,720) / 2]`

`=\$ 50,370 / \$ 6,485`

= 7.77 times

Days to collect = 365 divided by Accounts receivable turnover ratio

= $365 divided by 7.77

= 47 days

Note: The number of days that has been assumed is 365 days