Answer:
a. accounts receivable turnover rate is 12 times
b. Average days sales outstanding is 30 days
Explanation:
Computation of accounts receivable turnover rate
The accounts receivable turnover rate is determined by dividing the credit sales with the average receivables.
Credit Sales = $ 1,800,000
Average Receivables = $ 150,000
Receivables Turnover rate = $ 1,800,000/ $ 150,000 = 12 times
Computation of Average Days outstanding
Average days outstanding is computed by dividing the annual credit sales by 365 and using that as a divisor with the average receivables
Annual Credit Sales = $ 1,800,000
No of days 365
Average daily credit sales = $ 1,800.000/365 = $ 4,931.50
No of days sales = Average receivables/ Average daily credit sales
= $ 150,000/ $ 4,931.5 = 30.4 days rounded to 30 days
