Chapter 9, Problem 2AA

Requirement-1:

To determine

To calculate:

The Accounts receivable turnover ratio for Apple and Google for the two most recent years:

To determine

Accounts receivable turnover ratio:

This is an efficiency ratio that indicates the conversion of accounts receivable into cash. This ratio is calculated by dividing the Net credit Sales by the Average accounts receivable. The formula to calculate this ratio is as follows:

  $Accountsreceivableturnoverratio= \frac{NetcreditSales}{Averageaccountsreceivable}$

Days Sales uncollected:

This is an efficiency ratio that indicates the period for which credit sales remain as receivable. The ratio is calculated by multiplying Accounts receivable with 365 days and dividing the result by Net Sales. The formula for Days Sales uncollected is as follows:

  $DaysSalesuncollected=\frac{AccountsReceivable*365}{NetSales}$

Requirement-2:

To calculate:

Number of days it takes to collect receivable for Apple and Google for the two most recent years:

To determine

Accounts receivable turnover ratio:

This is an efficiency ratio that indicates the conversion of accounts receivable into cash. This ratio is calculated by dividing the Net credit Sales by the Average accounts receivable. The formula to calculate this ratio is as follows:

  $Accountsreceivableturnoverratio= \frac{NetcreditSales}{Averageaccountsreceivable}$

Days Sales uncollected:

This is an efficiency ratio that indicates the period for which credit sales remain as receivable. The ratio is calculated by multiplying Accounts receivable with 365 days and dividing the result by Net Sales. The formula for Days Sales uncollected is as follows:

  $DaysSalesuncollected=\frac{AccountsReceivable*365}{NetSales}$

Requirement-3:

To Identify:

The company which collects its receivables more early in the current year