Accounts receivable Less: Allowance for doubtful accounts. Net accounts receivable Net sales (assume all on credit) Numerator Denominator Numerator Denominator (dollars in thousands) Required: 1. Determine the receivables turnover ratio and average days sales in receivables for the current year. (Use 365 days a year. Enter your answers in thousands not in dollars.) Current Year $ 7,851,000 252,000 $ 7,599,000 $ 60,319,000 Receivables Turnover Ratio Net sales Average net trade accounts receivable Receivables turnover Average Days Sales in Receivables 365 Previous Year $7,430,000 178,000 $7,252,000 $ 60,319,000 0 times 0 days
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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.
Please fill up the three blanks and explian how it was done if you can (what rules/formulas were used).
![### Understanding Receivables Turnover and Average Days Sales in Receivables
#### Financial Data Overview (in thousands)
- **Accounts Receivable**
- Current Year: $7,851
- Previous Year: $7,430
- **Less: Allowance for Doubtful Accounts**
- Current Year: $252
- Previous Year: $178
- **Net Accounts Receivable**
- Current Year: $7,599
- Previous Year: $7,252
- **Net Sales (assume all on credit)**
- Current Year: $60,319
#### Task: Calculate Key Ratios
**Objective**: Determine the receivables turnover ratio and the average days sales in receivables for the current year.
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### Receivables Turnover Ratio Calculation
- **Numerator**: Net Sales
- **Denominator**: Average Net Trade Accounts Receivable
\[ \text{Receivables Turnover Ratio} = \frac{\text{Net Sales}}{\text{Average Net Trade Accounts Receivable}} \]
- **Net Sales** Value Used: $60,319,000 (in thousands)
The turnover ratio indicates how many times a company collects its average accounts receivable in a year.
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### Average Days Sales in Receivables Calculation
- **Numerator**: 365 Days
- **Denominator**: Receivables Turnover
\[ \text{Average Days Sales in Receivables} = \frac{365}{\text{Receivables Turnover}} \]
This calculation reflects the average number of days it takes to collect receivables.
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By understanding these metrics, financial analysts can assess a company's efficiency in managing its accounts receivable.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb1929a2f-f82e-4a25-85fb-a63e31d4f17a%2F0377dd08-543d-4763-8098-b40ee1a57db7%2Fgkoebw9_processed.png&w=3840&q=75)
Average Accounts Receivable :— It is calculated by dividing sum of beginning accounts receivable and ending accounts receivable by 2.
Receivable Turnover Ratio :— It is calculated by dividing by net sales by average accounts receivable.
Average days sales in receivable :— It is calculated by dividing 365 by receivable turnover ratio.
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