The following data have been extracted from the financial statements of a firm for two years, 1993 and 1994:
1993 1994
Assets 10,895 12,444 -
Sales 8,465 9,275 -
Inventory 3,126 3,549
COGS 7,120 7,387 -
Receivables 2,154 1,768
The receivables turnover ratio and the average receivables collection period for 1994 equal ________.
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A. B. C. D.D
Receivables turnover ratio = Net annual sales/average receivables Average receivables collection period = 365/receivables turnover. Typically, average receivables for a given year are taken to be the average of the ending values of the receivables for this year and the last year. For 1994, the average receivables equal (2154+1768)/2 = 1,961. Receivables turnover ratio = 9,275/1,961 = 4.73. Average receivables collection period = 365/4.73 = 77.17 days.