Question

please explain ! :)

Below are amounts (in millions) from three companies' annual reports. Beginning Accounts Receivable $1,745 5,816 S59 Ending Accounts Receivable $2,692 6,344 595 Walco Tar Mart Costet Net Sales $315,427 60,878 61,963 Required: 1. Calculate the receivables turnover ratio and the average collection period for WalCo, TarMart and CostGet. (Do not round intermediate calculations. Enter your answers in millions. Round your "Average accounts receivable" and "Receivables turnover ratio" answers to one decimal place.) Receivables Turnover Ratio Receivables turnover ratio Walco Tarlar CostGet Average Collection Period Average collection period days days Tartart CostGet das

Answer 1

1.

Receivable Turnover Ratio
	Net Sales	/	Average Accounts receivable	=	Accounts Receivable Turnover
Walco	315,427.00	/	(1,745+2,692)/2	=	142.18	Times
Tarmart	60,878.00	/	(5,816 + 6,344)/2	=	10.01	Times
Costget	61,963.00	/	(559 + 595)/2	=	107.39	Times
Average Collection Period
	365	/	Receivables turnover ratio	=	Average collection period
Walco	365.00	/	142.18	=	2.57	Days
Tarmart	365.00	/	10.01	=	36.45	Days
Costget	365.00	/	107.39	=	3.40	Days

2.

Of these three companies, WalCo appears most efficient in collecting cash from sales  (142.18 times).