Presented here is basic financial information (in millions) from the annual reports of Nike and adidas. Nike adidas Net credit sales $20,968 $14,200 Allowance for doubtful accounts, Jan. 1 72 110 Allowance for doubtful accounts, Dec. 31 86 118 Accounts receivable balance (gross), Jan. 1 Accounts receivable balance (gross), Dec. 31 2,500 2,100 2,900 1,400 Calculate the accounts receivable turnover and average collection period for both companies. (Round answers to 1 decimal place, e.g. 15.2. Use 365 days for calculation.) Accounts receivable turnover Average collection period Nike adidas times times days 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.
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