Cash and sh ort-term investments Accounts receivable (net) Inventory Property, p

Question

Cash and sh ort-term investments Accounts receivable (net) Inventory Property, plant and equipment 45,000 35,000 20,000 Total Assets Liabilities and Stockholders' Equity Current liabilities Long-term liabilities Stockholders' equity-common 50,000 90,000 160,000 2 Total Liabilities and Stockholders' Equity Income Statement Sales Cost of goods sold Gross profit Operating expenses s 105,000 39,000 $ 9,000 66.00 Net income Number of shares of common stock Market price of common stock Dividends per share 6,000 $20 50 What is the receivables turnover for Sampson? 1.5 times 1.1 times 3.0 times 12.9 times

Explanation / Answer

Answer is 3 times

Explanation

Receivables turnover ratio = Net credit sales ÷ Average accounts receivables

Net credit sales = $105,000

Average accounts receivables = $35,000

Receivables turnover ratio = $105,000 ÷ $35,000 = 3 times

Interpretation

Sampson is converting its accounts receivables into cash 3 times a year. In other words, Sampson is collecting accounts receivables 3 times during a year.

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