Exercise 5-18 (Algo) Calculate receivables ratios (LO5-8) Below are amounts (in millions) from three companies' annual reports.. Beginning Accounts WalCo TarMart CostGet Receivable $1,655 5,366 469 Ending Accounts Receivable $2,602 5,894 505 Net Sales 386,427 51,878 52,963 Required: 1. Calculate the receivables turnover ratio and the average collection period for WalCo, TarMart and CostGet. 2. Which company appears most efficient in collecting cash from sales? Complete this question by entering your answers in the tabs below. Choose Numerator Required 1 Required 2 Calculate the receivables turnover ratio and the average collection period for WalCo, TarMart and CostGet. (Enter your answers in millions rounded to 1 decimal place.) Receivables Turnover Ratio Choose Denominator
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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.
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