Accounts receivable turnover and days' sales in receivables Best Buy is a specialty retailer of consumer electronics, including personal computers, entertainment software, and appliances. Best Buy operates retail stores in addition to the Best Buy, Media Play, On Cue, and Magnolia Hi-Fi websites. For two recent years, Best Buy reported the following (in millions): Sales: year 2: $39528 and year 1: $40339 Accounts receivable at end of year: year 2: 1162 and year 1: 1280 Assume that the accounts receivable (in millions) were $1,308 at the beginning of fiscal Year 1. Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places. Compute the days' sales in receivables at the end of Year 2 and Year 1. Use 365 days and round to one decimal place. What conclusions can be drawn from (1) and (2) regarding Best Buy's efficiency in collecting receivables? What assumption did we make about sales for the Best Buy ratio computations that might distort the ratios and therefore cause the ratios not to be comparable for Year 2 and Year 1? Be sure to complete all steps and sections of the problem and show all your work. Clearly label your answers, and make sure your responses to numbers 3 and 4 are in complete sentences.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Best Buy is a specialty retailer of consumer electronics, including personal computers, entertainment software, and appliances. Best Buy operates retail stores in addition to the Best Buy, Media Play, On Cue, and Magnolia Hi-Fi websites. For two recent years, Best Buy reported the following (in millions):
Sales: year 2: $39528 and year 1: $40339
Accounts receivable at end of year: year 2: 1162 and year 1: 1280
Assume that the accounts receivable (in millions) were $1,308 at the beginning of fiscal Year 1.
- Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places.
- Compute the days' sales in receivables at the end of Year 2 and Year 1. Use 365 days and round to one decimal place.
- What conclusions can be drawn from (1) and (2) regarding Best Buy's efficiency in collecting receivables?
- What assumption did we make about sales for the Best Buy ratio computations that might distort the ratios and therefore cause the ratios not to be comparable for Year 2 and Year 1?
Be sure to complete all steps and sections of the problem and show all your work. Clearly label your answers, and make sure your responses to numbers 3 and 4 are in complete sentences.
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