Question

At the beginning of the year, Vici Ventures had accounts receivable of $220,000. At the end of the year, the company had accounts receivable of $340,000. During the year, Vici had total sales of $1,000,000, 70% of which were credit sales. What was Vici's receivables turnover ratio for the year?

Answer 1

Answer:

Vici's receivables turnover ratio for the year is 2,5

Explanation:

We can calculate the  Accounts receivable turnover by dividing net credit sales by the average accounts receivable for that period.

Accounts receivable turnover= net credit sales /average accounts receivable

In this case ,  

Net credit sales=  70% of total sales= 70% $1,000,000= 700,000

To get average accounts receivable, add the value of accounts receivable at the beginning to the value at the end of the period and divide the sum by two

Average accounts receivable= ($220,000+$340,000)/2

Average accounts receivable= $280,000

Then,

Accounts receivable turnover= 700,000/$280,000=2,5