Asked by Mackenzie Dolishny on Jul 06, 2024
Verified
Shelly Company reported the following financial information: 12/31/1712/31/16 Accounts receivable $340,000$360,000 Net credit sales 2,450,0002,420,000\begin{array}{lrr}&12/31/17&12/31/16\\\text { Accounts receivable } & \$ 340,000 & \$ 360,000 \\\text { Net credit sales } & 2,450,000 & 2,420,000\end{array} Accounts receivable Net credit sales 12/31/17$340,0002,450,00012/31/16$360,0002,420,000 Compute (a) the accounts receivable turnover and (b) the average collection period for 2017.
Accounts Receivable Turnover
A financial ratio that measures how efficiently a company collects receivables or the credit it extends to customers.
Average Collection Period
A financial metric that measures the average number of days it takes for a company to collect payments from its customers.
Accounts Receivable
Money owed to a business by its customers for goods or services that have been delivered but not yet paid for.
- Gain insight into the procedures for determining and explaining various financial ratios, encompassing liquidity, solvency, and profitability.
- Develop an understanding of the importance and methodological aspects of comparative financial statement analysis, involving horizontal, vertical, and trend analyses.
Verified Answer
b) Average collection period = 365 ÷ 7 = 52.1 days
Learning Objectives
- Gain insight into the procedures for determining and explaining various financial ratios, encompassing liquidity, solvency, and profitability.
- Develop an understanding of the importance and methodological aspects of comparative financial statement analysis, involving horizontal, vertical, and trend analyses.
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