
Concept explainers
Compute (1) days’ sales uncollected, (2)

Explanation of Solution
(1) Days’ sales uncollected: This ratio is used to determine the number of days a particular company takes to collect accounts receivables.
For 2016:
For 2017:
(2) Accounts receivable turnover: Receivables turnover ratio is mainly used to evaluate the collection process efficiency. It helps the company to know the number of times the accounts receivable is collected in a particular time period. This ratio is determined by dividing credit sales and average accounts receivable.
For 2016:
For 2017:
(3) Inventory turnover: Inventory turnover ratio is used to determine the number of times inventory used or sold during the particular accounting period.
For 2016:
For 2017
(4) Days’ sales in inventory: Days’ in inventory is determined as the number of days a particular company takes to make sales of the inventory available with them.
For 2016:
For 2017:
Analysis and comment on changes:
Days’ sales collection ratio is increased and accounts receivable turnover ratio is decreased from 2016 to 2017. Inventory turnover ratio is decreased and days’ sale in inventory is increased from 2016 to 2017.
The above ratios indicate that the Company S is becoming inefficient in collection of account receivables and managing the inventory.
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