Polo Ralph Lauren Corporation designs, markets, and distributesa variety of appa
ID: 2457692 • Letter: P
Question
Polo Ralph Lauren Corporation designs, markets, and distributesa variety of apparel, home décor, accessory, and fragranceproducts. The company’s products include such brands asPolo by Ralph Lauren, Ralph Lauren Purple Label, Ralph Lauren PoloJeans Co., and Chaps. Polo Ralph Laruen reported the following(in thousands):
For the Period Ending
Mar. 31,2007 April 1, 2006
NetSales 4,295,400 3,746,300
Accountsreceivable 511,900 516,600
Assume that the accounts receivable (in millions) were $530,503at the beginning of the 2006 fiscal year.
(Text notes: (a) 2007: 8.4)
Explanation / Answer
1. Accounts Receivable Turnover for 2006 A/R Turnover = Netsales Average A/R =3,746,300 Average receivables = Beg. Receivables + endingreceivables 523,551.5 2 = 530,503 + 516,600 = 523,551. =7.2 2 A / R Turnover for 2007 4,295,400 Average receivables = 516,600 +511,900 514,250 2 = 8.4 2. Days sales for 2006 365 7.2 = 50.7 days Days sales for 2007 365 8.4 = 43.5 days 3.Ralph Lauren's inventory Turnover has increased from 7.2 to 8.4 ,which means the company's inventory sales has improved compared tothe previous period. And the average A/R collection period has decreased from 50.7 daysto 43.5 days. The company is collecting its receivablesbetter now , meaning the customers are paying in 43.5 days itselfinstead the payment was made in 50.7 days in 2006.