A company had net sales of $570,000, total sales of $720,000, and average accounts receivable, net of $81,500. Its accounts receivable turnover equals: Multiple Choice 8.83 6.99 0.79 0.14 0.11 C
A company had net sales of $570,000, total sales of $720,000, and average accounts receivable, net of $81,500. Its accounts receivable turnover equals: Multiple Choice 8.83 6.99 0.79 0.14 0.11 C
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![**Understanding Accounts Receivable Turnover**
In financial analysis, one of the key metrics is the accounts receivable turnover ratio, which helps determine how efficiently a company is collecting its receivables.
**Problem Statement:**
A company had net sales of $570,000, total sales of $720,000, and average accounts receivable (net) of $81,500. The accounts receivable turnover is calculated to determine how many times, on average, the company collects its receivables during the year.
**Multiple Choice Question:**
Calculate the company's accounts receivable turnover using the following options:
- 8.83
- 6.99
- 0.79
- 0.14
- 0.11
**Explanation:**
The accounts receivable turnover ratio is calculated with the formula:
\[ \text{Accounts Receivable Turnover} = \frac{\text{Net Sales}}{\text{Average Accounts Receivable}} \]
Given:
- Net Sales = $570,000
- Average Accounts Receivable = $81,500
By substituting the values into the formula:
\[ \text{Accounts Receivable Turnover} = \frac{570,000}{81,500} \approx 7 \]
Therefore, the correct answer is close to 6.99. This ratio helps in understanding how efficiently the company is managing and collecting its accounts receivable, which is crucial for maintaining healthy cash flow.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb045d792-9702-4f0f-a214-b11e7d1d3c32%2Fa583ec3f-756e-41e4-b30e-843abcdfd75a%2Fqbjgac_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Understanding Accounts Receivable Turnover**
In financial analysis, one of the key metrics is the accounts receivable turnover ratio, which helps determine how efficiently a company is collecting its receivables.
**Problem Statement:**
A company had net sales of $570,000, total sales of $720,000, and average accounts receivable (net) of $81,500. The accounts receivable turnover is calculated to determine how many times, on average, the company collects its receivables during the year.
**Multiple Choice Question:**
Calculate the company's accounts receivable turnover using the following options:
- 8.83
- 6.99
- 0.79
- 0.14
- 0.11
**Explanation:**
The accounts receivable turnover ratio is calculated with the formula:
\[ \text{Accounts Receivable Turnover} = \frac{\text{Net Sales}}{\text{Average Accounts Receivable}} \]
Given:
- Net Sales = $570,000
- Average Accounts Receivable = $81,500
By substituting the values into the formula:
\[ \text{Accounts Receivable Turnover} = \frac{570,000}{81,500} \approx 7 \]
Therefore, the correct answer is close to 6.99. This ratio helps in understanding how efficiently the company is managing and collecting its accounts receivable, which is crucial for maintaining healthy cash flow.
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