Accounts Receivable Turnover and Average Collection Period VanPoole Corporation

Question

Accounts Receivable Turnover and Average Collection Period VanPoole Corporation disclosed the following financial information (in millions) in its recent annual report:

Calculate the accounts receivable turnover ratio for both years. (Round your answer to two decimal points.)

Calculate the average collection period for both years. (Use 365 days for calculation. Round to the nearest whole number.)

Is the company's accounts receivable management improving or deteriorating?

2012 2013 Net Sales $78,096 $92,596 Beginning Accounts Receivable (net) 4,896 4,696 Ending Accounts Receivable (net) 4,696 4,598

Explanation / Answer

account receivable turnover = net credit sales / averaage account recievable

account receivable turnover 2012 = 78096/(4896+4696/2) = 16.28

account receivable turnover in 2013 = 92596/(4696 + 4598/2) = 19.93

b)

average collection period = 365 /account receivable turnover

average collection period in 2012 = 365/16.28 = 22 days

average collection period in 2013 = 365/19.93 = 18 days

c)

the company's receivable management improved , as collection period is decreased

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