Analyzing Accounts Receivable Lupin Pharmaceuticals, an Indian transnational pharmaceutical company, develops and markets a wide portfolio of branded and generic products. The company reported the following in its 2018 annual report. INR millions 2018 2017 2016 Trade receivables $45,961.5 $38,184.8 $40,432.7 Less provision for doubtful receivables 306.9 318.4 448.2 Trade receivables, net $45,654.6 $37,866.4 $39,984.5 Total assets $140,958 $146,544 $127,375 Revenue from operations 158,042 174,943 142,555 Required a. Calculate days sale outstanding (DSO) for 2018 and 2017. Note: Round amount (your final answer) to one decimal place (for example, enter 6.8 for 6.77555). DSO for 2018 Answer days DSO for 2017 Answer days b. Determine the total amount that customers owe Lupin each year. Note: Round dollar amount (your final answer) to one decimal place (for example, enter 6.8 for 6.77555). Amount owed in 2018 Answer Amount owed in 2017 Answer Amount owed in 2016 Answer c. What proportion of trade receivables is doubtful each year? Note: Round percentage (your final answer) to two decimal places (for example, enter 0.66% for 0.6555%). 2018: Proportion of AR that is doubtful Answer 2017: Proportion of AR that is doubtful Answer 2016: Proportion of AR that is doubtful Answer d. From this ratio, what do we conclude about the quality of its trade receivables over time? We can conclude that the quality of receivables has Answer over time.
Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
Analyzing Accounts Receivable
Lupin Pharmaceuticals, an Indian transnational pharmaceutical company, develops and markets a wide portfolio of branded and generic products. The company reported the following in its 2018 annual report.
| INR millions | 2018 | 2017 | 2016 |
|---|---|---|---|
| Trade receivables | $45,961.5 | $38,184.8 | $40,432.7 |
| Less provision for doubtful receivables | 306.9 | 318.4 | 448.2 |
| Trade receivables, net | $45,654.6 | $37,866.4 | $39,984.5 |
| Total assets | $140,958 | $146,544 | $127,375 |
| Revenue from operations | 158,042 | 174,943 | 142,555 |
Required
a. Calculate days sale outstanding (DSO) for 2018 and 2017.
Note: Round amount (your final answer) to one decimal place (for example, enter 6.8 for 6.77555).
| DSO for 2018 | Answer | days |
| DSO for 2017 | Answer | days |
b. Determine the total amount that customers owe Lupin each year.
Note: Round dollar amount (your final answer) to one decimal place (for example, enter 6.8 for 6.77555).
| Amount owed in 2018 | Answer |
| Amount owed in 2017 | Answer |
| Amount owed in 2016 | Answer |
c. What proportion of trade receivables is doubtful each year?
Note: Round percentage (your final answer) to two decimal places (for example, enter 0.66% for 0.6555%).
| 2018: Proportion of AR that is doubtful | Answer |
| 2017: Proportion of AR that is doubtful | Answer |
| 2016: Proportion of AR that is doubtful | Answer |
d. From this ratio, what do we conclude about the quality of its trade receivables over time?
We can conclude that the quality of receivables has Answer over time.
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