The following select financial statement information from Candid Photography. CANDID PHOTOGRAPHY Year Net Credit Sales Ending Accounts Receivable 2017 net credit sales $2,988,000 accounts recievable $1,293,450 2018 net credit sales 3,756,860 accounts recievable 1,348,600 2019 net credit sales 4,001,350 accounts recievable 1,546,550 A. Compute the accounts receivable turnover ratios and the number of days’ sales in receivables ratios for 2018 and 2019. Round your answers to two decimal places. B. What do the outcomes tell a potential investor about Candid Photography if industry average for accounts receivable turnover ratio is 3 times and days’ sales in receivables ratio is 150 days? a. Candid collects its accounts more quickly than its competitors. b. A lender may favour Candid over its competitors because of its faster collection period. c. Past data suggests that the collection period is increasing from 2018 to 2019, which is something that might concern an investor if this trend were to continue. d. All of the above statements may be correct.
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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.
The following select financial statement information from Candid Photography. CANDID PHOTOGRAPHY Year Net Credit Sales Ending
2017 net credit sales $2,988,000 accounts recievable $1,293,450
2018 net credit sales 3,756,860 accounts recievable 1,348,600
2019 net credit sales 4,001,350 accounts recievable 1,546,550
A. Compute the accounts receivable turnover ratios and the number of days’ sales in receivables ratios for 2018 and 2019. Round your answers to two decimal places.
B. What do the outcomes tell a potential investor about Candid Photography if industry average for accounts receivable turnover ratio is 3 times and days’ sales in receivables ratio is 150 days?
| a. | Candid collects its accounts more quickly than its competitors. |
| b. | A lender may favour Candid over its competitors because of its faster collection period. |
| c. | Past data suggests that the collection period is increasing from 2018 to 2019, which is something that might concern an investor if this trend were to continue. |
| d. | All of the above statements may be correct. |
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