Question

Suppose the information below is from the 2022 financial statements and accompanying notes of The Scotts Company, a major manufacturer of lawn-care products. (in millions) 2022 2021 Accounts receivable $270.4 $259.7 Allowance for uncollectible accounts 10.6 11.4 Sales revenue 2,981.8 2,871.8 Total current assets 1,044.9 999.3Note 19. Concentrations of Credit Risk Financial instruments which potentially subject the Company to concentration of credit risk con- sist principally of trade accounts receivable. The Company sells its consumer products to a wide variety of retailers, including mass merchandisers, home centers, independent hardware stores, nurseries, garden outlets, warehouse clubs, food and drug stores and local and regional chains. Professional products are sold to commercial nurseries, greenhouses, landscape services and growers of specialty agriculture crops. Concentrations of accounts receivable at September 30, net of accounts receivable pledged under the terms of the New MARP Agreement whereby the pur- chaser has assumed the risk associated with the debtor's financial inability to pay ($146.6 million and $149.5 million for 2022 and 2021, respectively), were as follows. 2021 2022 Due from customers geographically located in North America 53% 52%Applicable to the consumer business 61% 54%Applicable to Scotts LawnService", the professional businesses (primarily distributors), Smith & Hawken and Morning Song 39% 46%Top 3 customers within consumer business as a percent of total consumer accounts receivable 0% 0% The remainder of the Company's accounts receivable at September 30, 2022 and 2021, were generated from customers located outside of North America, primary retailers, distribu- tors, nurseries and growers in Europe. No concentrations of customers or individual customers within this group account for more than 10% of the Company's accounts receivable at either balance sheet date. The Company's three largest customers are reported within the Global Consumer segment, and are the only customers that individually represent more than 10% of reported consolidated net sales for each of the last three fiscal years. These three customers accounted for the following percentages of consolidated net sales for the fiscal years ended September 30:________. Largest 2nd Largest 3rd Largest Customer Customer Customer 2022 21.0% 13.5% 13.4% 2021 20.2% 10.9% 10.2% 2020 21.5% 11.2% 10.5%Calculate the accounts receivable turnover and average collection period for 2022 for the company. (Round answers to 1 decimal places, e.g. 15.2. Use 365 days for calculation.)Accounts receivable turnover enter the accounts receivable turnover rounded to 1 decimal place timesAverage collection period enter the average collection period rounded to 1 decimal place days

Answer 1

Accounts Receivable Turnover= 11.7 times

Average collection period = 31.2 days

Step-by-step explanation:

Calculation for the accounts receivable turnover and average collection period for 2022 for the company.

A. Computation for accounts receivable turnover

Using this formula

Accounts Receivable Turnover = Sales revenue/Net accounts receivable

Let plug in the formula

Accounts Receivable Turnover= 2,981.8/254.05

Accounts Receivable Turnover= 11.7 times

B. Computation for average collection period

Using this formula

Average collection period = 365/Accounts Receivable Turnover

Let plug in the formula

Average collection period = 365/11.7

Average collection period = 31.2 days

Therefore Accounts Receivable Turnover will be 11.7 times while the Average collection period will be 31.2 days