Receivables turnover ratio= (net sales) / ( average accounts receivable net). What is included in average accounts receivable (+ or - bad & doubtful debts, + or - sales returns and allowances, or other that may or may not be included). Thank you.
Receivables turnover ratio= (net sales) / ( average accounts receivable net). What is included in average accounts receivable (+ or - bad & doubtful debts, + or - sales returns and allowances, or other that may or may not be included). Thank you.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Receivables turnover ratio= (net sales) / ( average accounts receivable net).
What is included in average accounts receivable (+ or - bad & doubtful debts, + or - sales returns and allowances, or other that may or may not be included). Thank you.
Expert Solution
Step 1 Definition
The Definition is Very important as it will clarify all issues.
Receivable Turnover ratio = This Ratio Helps in Determining the Number of times in a Year that Business Collects its Average Accountants Receivable.
So we Evaluate this Definition, we will have More Clarity.
The Collection can only Happen if its receivable so if any Accounts is bad debts or doubtful then its included in the Average accounts Receviable as it will not give clarity.
And also Accounts Receivable is created only When sales is made on Credit, So here Net Credit Sales is only considered , Cash sales, Any sales Return, Any Sales Allowances, Discount will be Deducted to arrive at the Net Sales
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