Chapter 9, Problem 9.4DIE

(a)

To determine

Accounts receivable turnover ratio:

Receivable turnover ratio can be defined as the average number of times a firm can turn its receivable into cash in an accounting period. The formulae to calculate accounts receivable turnover ratio is as below.

$\begin{array}{c}\text{Receivable}\text{Turnover}=\frac{\text{Net}\text{sales}}{\text{Average}\text{accounts}\text{receivable}}\\ \text{Average}\text{Accounts}\text{Receivable}=\frac{\text{Ending}\text{accounts}\text{receivables}}{2}\end{array}$

Days’ sales uncollected:

Days’ sales uncollected can be defined as the average time taken to collects the receivables of a firm. The formula to calculate the days’ sales uncollected is as below.

$\text{Days'}\text{sales}\text{uncollected}=\frac{\text{365}\text{days}}{\text{Receivable}\text{turnover}}$

To calculate: The accounts receivable turnover.

(b)

To determine

To calculate: The average days in inventory.