Mathis and Hashey are two of the largest and most successful toymakers in the wo
ID: 2538681 • Letter: M
Question
Mathis and Hashey are two of the largest and most successful toymakers in the world, in terms of the products they sell and their receivables management practices. To evaluate their ability to collect on credit sales, consider the following information reported in their annual reports (amounts in millions) Mathis 2011 Hashe 2010 Fiscal Year Ended: Net Sales 2010 $6,756$6,331 $6,718 2012 2012 2011 $5,002$4,968 $4,822 Accounts Receivable Allowance for Doubtful Accounts 1,208 26 814 29 940 30 1,032 35 684 36 1,112 37 Accounts Receivable, Net of Allowance 1,182 785 910 997 1,075 648 Required 1. Calculate the receivables turnover ratios and days to collect for Mathis and Hashey for 2012 and 2011 TIP: In your calculations, use average Accounts Receivable, Net of Allowance. (Use 365 days in a year. Do not round intermediate calculations on Accounts Receivable Turnover Ratio. Round your final answers to 1 decimal place. Use final rounded answers from Accounts Receivable Turnover Ratio for Days to Collect ratio calculation.) 2012 2011 Mathis Hashey Mathis Hashey Receivables Turnover Ratio Days to Collect 2-a. Which of the companies was quicker to convert its receivables into cash in 2012? Mathis Hashey 2-b. Which of the companies was quicker to convert its receivables into cash in 2011? Mathis HasheyExplanation / Answer
1) Calculation of receivables turnover ratio and days to collect: 2012 Mathis Recievables turnover ratio= Net sales/ average accounts recievable Average accounts receivable= (1182+785)/2= $983.5 Recievables turnover ratio= 6756/983.5= 6.9 Recievables turnover ratio=6.9 Days to collect= 365/ recievables turnover ratio= 365/6.9= 52.90 days Days to collect is 52.9 days 2012 Hashey Recievables turnover ratio= Net sales/ average accounts recievable Average accounts receivable= (997+1075)/2= $1036 Recievables turnover ratio= 5002/1036= 4.8 Recievables turnover ratio=4.8 Days to collect= 365/ recievables turnover ratio= 365/4.8= 76 Days to collect is 76 days 2011 Mathis Recievables turnover ratio= Net sales/ average accounts recievable Average accounts receivable= (785+910)/2= $847.5 Recievables turnover ratio= 6331/847.5= 7.5 Recievables turnover ratio=7.5 Days to collect= 365/ recievables turnover ratio= 365/7.5= 48.7 days Days to collect is 48.7 days 2011 Hashey Recievables turnover ratio= Net sales/ average accounts recievable Average accounts receivable= (1075+648)/2= $861.5 Recievables turnover ratio= 4968/861.5= 5.8 Recievables turnover ratio=5.8 Days to collect= 365/ recievables turnover ratio= 365/5.8= 62.9 days Days to collect is 62.9 days 2-a) Mathis was quicker to convert its recievables into cash in 2012 2-b) Mathis was quicker to convert its recievables into cash in 2011