Accounts receivable turnover rate
During 2015, Larsen Company's accounts receivable averaged $750,000. Larsen's 2015 income statement reported net sales of $6,780,000, uncollectible accounts expense of $160,000, and net income of $768,000. (Assume 365 days in a year.)
Using the information, compute the following for Larsen Company:
(a) Accounts receivable turnover: (Round to the nearest two decimals.)
(b) Average number of days to collect accounts receivable
(Round to nearest day, if necessary): (Round to the nearest %.)
What will be an ideal response?
a) 9.04 times ($6,780,000 ÷ 750,000).
(b) 365 days ÷ 9.04 (part a) = 40 days.
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