Chapter 8, Problem 8.2EYCT

(a) (1)

To determine

Accounts receivable turnover

Accounts receivable turnover is a liquidity measure of accounts receivable in times, which is calculated by dividing the net credit sales by the average amount of net accounts receivables. In other words, it indicates the number of times the average amount of net accounts receivables collected during a particular period.

Average collection period:

Average collection period indicates the number of days taken by a business to collect its outstanding amount of accounts receivable on an average.

To calculate: The accounts receivable turnover of Company P and Company C for 2015.

(2)

To determine

To calculate: The average collection period of Company P and Company C for 2015.

(b)

To determine

To conclude: The Efficiency of management in handling accounts receivable.