Question

The financial statements of the Wildhorse Co. reports net sales of $507150 and accounts receivable of $105000 and $42000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Wildhorse Co.?

Answer 1

The accounts receivable turnover ratio is 6.9 times.

Step-by-step explanation:

The accounts receivable turnover is a ratio to check the efficiency of a business. The ratio calculates the company's efficiency in extending and collecting credit. It tells us how many times the business has collected its average accounts receivable during the year. The formula to calculate the accounts receivable turnover ratio is,

Accounts receivable turnover = Net Sales / Average accounts receivable

Where, Average accounts receivable = (Accounts receivable at start + Accounts receivable at end) / 2

Average accounts receivable = (105000 + 42000) / 2 = 73500

Accounts Receivable Turnover = 507150 / 73500 = 6.9 times