Task 2: Evaluate the company's efficiency in collecting its accounts receivable during the fiscal year ended 31 December 2021. Use the company's information from its annual reports: Receivables as of 31 December 2020 $4,468,392 $4,972,722 $45,349,943 Receivables as of 31 December 2021 Sales revenue for year ended 31 December 2021 1. Calculate the company's number of days of sales outstanding (DSO) for the fiscal year ended 31 December 2021. (Use the average receivables to calculate the ratio). Accounting receivable = Net Average Day's sales in receivable = 154 2. Interpret the calculated ratio. 3. Assume that the industry average DSO ratio is 60 days. Based on this information and the subject company's DSO ratio, critically evaluate the company's credit policy and its implications.
Task 2: Evaluate the company's efficiency in collecting its accounts receivable during the fiscal year ended 31 December 2021. Use the company's information from its annual reports: Receivables as of 31 December 2020 $4,468,392 $4,972,722 $45,349,943 Receivables as of 31 December 2021 Sales revenue for year ended 31 December 2021 1. Calculate the company's number of days of sales outstanding (DSO) for the fiscal year ended 31 December 2021. (Use the average receivables to calculate the ratio). Accounting receivable = Net Average Day's sales in receivable = 154 2. Interpret the calculated ratio. 3. Assume that the industry average DSO ratio is 60 days. Based on this information and the subject company's DSO ratio, critically evaluate the company's credit policy and its implications.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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Transcribed Image Text:Task 2:
Evaluate the company's efficiency in collecting its accounts receivable during the fiscal year ended 31
December 2021. Use the company's information from its annual reports:
Receivables as of 31 December 2020
$4,468,392
$4,972,722
$45,349,943
Receivables as of 31 December 2021
Sales revenue for year ended 31 December 2021
1. Calculate the company's number of days of sales outstanding (DSO) for the fiscal year ended 31
December 2021. (Use the average receivables to calculate the ratio).
Not
Accounting receivable
Average
Day's sales in receivable = 154;
2. Interpret the calculated ratio.
3. Assume that the industry average DSO ratio is 60 days. Based on this information and the subject
company's DSO ratio, critically evaluate the company's credit policy and its implications.
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