172k views
5 votes
Presented here is basic financial information (in millions) from the annual reports of Nike and Adidas.

Nike Adidas
Sales $18,627 $10,299
Allowance for doubtful accounts, Jan. 1 71.5 112
Allowance for doubtful accounts, Dec. 31 78.4 111
Accounts receivable balance (gross), Jan 1 2,566.2 1,527
Accounts receivable balance (gross), Dec. 3 12,873.7 1,570

Required:
Calculate the accounts receivable turnover and average collection period for both companies.Comment on the difference in their collection experiences.

User Dykam
by
7.6k points

1 Answer

5 votes

Answer and Explanation:

Nike

$18,627÷ ($2,494.7a+ $2,795.3b)/2

$18,627÷$2,645 = 7.0 times

Adidas

$10,299÷$1,415c+ $1,459d)/2

10,299÷$1 437= 7.2 times

2,566.2 – 71.5

b2,873.7 – 78.4

c1,527 – 112

d1,570 – 111

Average collection period

Nike

365÷7.0= 52.1 days

Adidas

365÷7.2

= 50.7 days

Therefore Adidas's accounts receivable turnover was about 3% higher [(7.2 – 7.0) ÷7.0] than that of Nike's, which simply means that Adidas was slightly more efficient than Nike in turning accounts receivable into cash.

User Bon Andre Opina
by
8.0k points

No related questions found