Procter & Gamble is a multinational corporation that manufactures and markets many household products. Last year, sales for the company were $83,062 (all amounts in millions). The annual report did not disclose the amount of credit sales, so we will assume that 90 percent of sales were on credit. The average gross profit on sales was 49 percent. Additional account balances were: Ending Beginning Accounts receivable (net) $6,386 $6,508 Inventory 6,759 6,909 Required: Compute Procter & Gamble’s receivables turnover ratio and its inventory turnover ratio. On average, how many days does it take for the company to collect its accounts receivable and sell its inventory?
Procter & Gamble is a multinational corporation that manufactures and markets many household products. Last year, sales for the company were $83,062 (all amounts in millions). The annual report did not disclose the amount of credit sales, so we will assume that 90 percent of sales were on credit. The average gross profit on sales was 49 percent. Additional account balances were: Ending Beginning Accounts receivable (net) $6,386 $6,508 Inventory 6,759 6,909 Required: Compute Procter & Gamble’s receivables turnover ratio and its inventory turnover ratio. On average, how many days does it take for the company to collect its accounts receivable and sell its inventory?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
Question
Procter & Gamble is a multinational corporation that manufactures and markets many household products. Last year, sales for the company were $83,062 (all amounts in millions). The annual report did not disclose the amount of credit sales, so we will assume that 90 percent of sales were on credit. The average gross profit on sales was 49 percent. Additional account balances were:
Ending Beginning
Accounts receivable (net) $6,386 $6,508
Inventory 6,759 6,909
Required:
Compute Procter & Gamble’s receivables turnover ratio and its inventory turnover ratio. On average, how many days does it take for the company to collect its accounts receivable and sell its inventory?
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