Question

Swifty Company had net credit sales during the year of $1450000 and cost of goods sold of $700000. The balance in accounts receivable at the beginning of the year was $200000, and the end of the year it was $90000. What was the accounts receivable turnover

Answer 1

Answer:

Account Receivable Ratio = 10

Explanation:

Account Receivable Turnover Ratio:

The Account Receivable Turnover Ratio is an accounting measure that indicates the effectiveness of company's ability to collect its receivables from its customers.

A high turnover ratio represents good credit policy and aggressive collections  department with good portfolio of customers.

A low turnover ratio indicates excess amount of old receivables being tied up in working capital.

Formula: Net Credit Sales ÷ (Opening receivable + closing receivable/2)

Receivable Turnover Ratio = $ 1,450,000 ÷ ( $200,000+$90,000/2)

=$1,450,000 ÷ $145,000

= 10