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Alja [10]
3 years ago
7

Magneto Company had net credit sales during the year of $1,350,000 and cost of goods sold of $810,000. The balance in accounts r

eceivable at the beginning of the year was $180,000, and the end of the year it was $120,000. What was the accounts receivable turnover?
Business
1 answer:
Mamont248 [21]3 years ago
4 0

Answer:

Account receivable turnover ratio = 9

Explanation:

The account receivable turnover ratio shows how well a business is managing its credit line it extended to its customers.It provides information on how effective a business is in the collection of amounts due from customers in respect of credit sales made.

It is calculated using the  formula below:

Account receivable turnover  =

Net credit sales/ Average account receivable

<em>Average account receivable=</em>

<em>(Receivable balance at the begin. + Receivable balance at the end)/2</em>

We can calculate the account receivable turnover for Magneto Company as follows:

Step 1

<em>calculate the average account receivable</em>

= ($180,000+ $120,000)/2

= $150,000

Step 2

<em>Calculate the account receivable turnover ratio ( ARTR)</em>

ART = $1,350,000/$150,000

      = 9

Account receivable turnover ratio = 9

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