Chapter 8, Problem 8.2ADM

Ralph Lauren: Accounts receivable turnover and number of days' sales in receivables

Ralph Lauren Corporation designs, markets, and distributes a variety of apparel, home decor, accessory, and fragrance products. The company’s products include such brands as Ralph Lauren, Polo by Ralph Lauren, and Chaps. For two recent years, the company reported the following (in millions):

	Year 2	Year 1
Sales	$7,620	$7,450
Accounts receivable (end of year)	655	588

The accounts receivable at the beginning of Year 1 was $458 million.

1. A. Compute the accounts receivable turnover for Year 1 and Year 2. (Round to one decimal place.)
2. B. Compute the number of days’ sales in receivables for Year 1 and Year 2. (Use 365 days and round all calculations to one decimal place.)
3. C. What conclusions can be drawn from these analyses regarding Ralph Laurens efficiency in collecting receivables?