The Forrester Corporation disclosed the following financial information (in millions) in its recent annual report: 2015 2016 Net sales $71, 050 $81, 662 Beginning accounts receivable (net) 3, 896 4, 100 Ending accounts receivable (net) 4, 100 3, 596 Calculate the accounts receivable turnover ratio for both years Calculate the average collection period for both years. Is the company’s account receivable management improving or deteriorating?
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
E8-7A
The Forrester Corporation disclosed the following financial information (in millions) in its recent annual report:
2015 2016
Net sales $71, 050 $81, 662
Beginning accounts receivable (net) 3, 896 4, 100
Ending accounts receivable (net) 4, 100 3, 596
- Calculate the accounts receivable turnover ratio for both years
- Calculate the average collection period for both years.
- Is the company’s
account receivable management improving or deteriorating?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
