Question

Suppose the amounts presented here are basic financial information (in millions) from the 2022 annual reports of Nike and Adidas. Nike Adidas Sales revenue $18,590.4 $9,784.8 Allowance for doubtful accounts, beginning 77.0 129.0 Allowance for doubtful accounts, ending 119.0 133.0 Accounts receivable balance (gross), beginning 2,614.0 1,580.0 Accounts receivable balance (gross), ending 2,746.0 1,400.0 1. Calculate the accounts receivable turnover for both companies. 2. Calculate the average collection period for both co

Answer 1

Answer:

1, Nike = 18,590 / [(2,614 + 2,746) / 2] = 7 days

Adidas = 9,784.8 / [(1,580+1400)/2] = 6.57 days

2. Nike = 365 / 6.94 days = 52 days

Adidas = 365 / 6.57 days = 55 days

Explanation:

A. Accounts receivable turnover for both companies.

1. To calculate the accounts receivable turnover, start by adding the beginning and ending accounts receivable and divide it by 2

2. to calculate the average accounts receivable for the period. Take the figure in 1 above and divide it into the net credit sales for the year for the average accounts receivable turnover.

Credit sales / [(opening receivables + closing receivables) / 2]

Nike = 18,590 / [(2,614 + 2,746) / 2] = 7 days

Adidas = 9,784.8 / [(1,580+1400)/2] = 6.57 days

2. Average collection Period = 365 / Average receivables Turnover ratio

Nike = 365 / 6.94 days = 52 days

Adidas = 365 / 6.57 days = 55 days