Your friend owns a small business and she asks for your advice. For the past cou

Question

Your friend owns a small business and she asks for your advice. For the past couple of years, her company has extended credit to its customers. She wonders how well her company manages its accounts receivable. During the most recent year, your friend's company had net credit sales of $743,000. Net Accounts receivable at the beginning of the year was $82,000. Ending net Accounts receivable was $77,000. The company's credit terms are net 30. What should you tell your friend regarding how well accounts receivable is managed? the accounts receivable turnover ratio to two Begin by calculating the business's accounts receivable turnover ratio for the year, (Round t decimal places, X.XX.) ounts receivablet er ratio

Explanation / Answer

Accounts receivable turnover ratio = Net credit sales / Average accounts receivable

Accounts receivable turnover ratio = $743,000 / [($82,000 + $77,000) / 2]

Accounts receivable turnover ratio = $743,000 / $79,500

Accounts receivable turnover ratio = 9.35

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