Chapter 9, Problem 9.6BPE

(a)

To determine

Accounts receivable turnover:

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

Days’ sales in receivables:

Days’ sales in receivables indicate the number of days taken by a business, to collect its outstanding amount of accounts receivable on an average. It is otherwise known as average collection period.

To calculate: Company R’s accounts receivable turnover ratio for 2016 and 2015.

(b)

To determine

To calculate: Company R’s days’ sales in receivables for 2016 and 2015.

(c)

To determine

To identify: Whether the change in accounts receivable turnover and the day’s sales in receivables from 2015 to 2016 are favorable or unfavorable.