Chapter 8, Problem 8.1MAD

Accounts Receivable Turnover and Number of Days’ Sales in Receivables

Analyze and compare Amazon.com to Best Buy

Amazon.com, Inc. (AMZN) is one of the largest Internet retailers in the world. Best Buy, Inc. (BBY) is a leading retailer of consumer electronics and media products in the United States. Amazon and Best Buy compete in similar markets; however, Best Buy sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Sales and accounts receivable information for both companies for a recent period follows (in millions):

	Amazon	Best Buy
Sales	$135,987	$39,528
Accounts receivable:
Beginning of year	5,654	1,280
End of year	8,339	1,162

  a.    Determine the accounts receivable turnover for each company. Round all calculations to one decimal place.

  b.    Determine the number of days’ sales in receivables for each company. Round all calculations to one decimal place.

  c.     Evaluate the relative efficiency in collecting accounts receivables between the two companies.

d.     What might explain this difference?