Carter & Evans reported the following rounded amounts (in millions): 2019 2018 Accounts Receivable $ 5,435 $ 5,140 Allowance for Doubtful Accounts (305) (310) Accounts Receivable, Net of Allowance $ 5,130 $ 4,830 Net Sales (assume all on credit) $ 40,500 $ 39,000 Required: Determine the receivables turnover ratio and days to collect for 2019. Do the measures calculated in requirement 1 represent an improvement (or deterioration) in receivables turnover, compared to 2018, when the turnover was 9.5?
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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.
Carter & Evans reported the following rounded amounts (in millions):
| 2019 | 2018 | |
|---|---|---|
| Accounts Receivable | $ 5,435 | $ 5,140 |
| Allowance for Doubtful Accounts | (305) | (310) |
| Accounts Receivable, Net of Allowance | $ 5,130 | $ 4,830 |
| Net Sales (assume all on credit) | $ 40,500 | $ 39,000 |
Required:
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Determine the receivables turnover ratio and days to collect for 2019.
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Do the measures calculated in requirement 1 represent an improvement (or deterioration) in receivables turnover, compared to 2018, when the turnover was 9.5?
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