Chapter 9 Receivables 475 For the Period Ending $7,450,000 800,000 Accounts rece

Question

Chapter 9 Receivables 475 For the Period Ending $7,450,000 800,000 Accounts receivable 857,000 FAI Assume that accounts receivable (in millions) were $607,000 at the beginning of a. Compute the accounts receivable tur Year 1. nover for Year 2 and Year 1. Round to two decimal b. Compute the days' sales in receivables for Year 2 and Year 1. Use 365 days and round What conclusions can be drawn from these analyses regarding Ralph Lauren's places. to one decimal place. efficiency in collecting receivables? OBJ. 8 EX 9-27 Accounts receivable turnover and days' sales in receivables The Campbell Soup Company manufactures and markets food products throughout the world. The following sales and receivable data (in millions) were reported by Campbell Soup for two recent years: : 12.27 Sales Accounts receivable $8,082 647 $8,268 670 Assume that the accounts receivable (in thousands) were $635 million at the beginning of Year 1. a. Compute the accounts receivable turnover for Year 2 and Year 1. Round average ac- counts receivable to one decimal place and accounts receivable turnover to two decimal b. Compute the days' sales in receivables at the end of Year 2 and Year 1. Use 365 days What conclusions can be drawn fros these analyses regarding Campbell's places and round to one decimal place. efficiency in collecting receivables?

Explanation / Answer

Answer 8-27 a. Accounts Receivable turnover ratio = Sales / Average Accounts Receivables Year 2 Year 1 Sales 7620000 7450000 / Average Accounts Receivables 828500 703500 Accounts Receivable Turnover ratio             9.20         10.59 b. Days sales in receivables = 365 days / Accounts receivable turnover ratio Year 2 Year 1 No.of days in a year 365 365 / Accounts Receivable turnover ratio           9.20         10.59 Days sales in receivables             39.7           34.5 c. From above ratios , it can be concluded that the Ralph Lauren is less efficient in collecting receivables in Year 2 as days sales receivables has increased from 34.47 days to 39.69 days. Answer 9-27 a. Accounts Receivable turnover ratio = Sales / Average Accounts Receivables Year 2 Year 1 Sales 8082 8268 / Average Accounts Receivables 658.5 652.5 Accounts Receivable Turnover ratio           12.27         12.67 b. Days sales in receivables = 365 days / Accounts receivable turnover ratio Year 2 Year 1 No.of days in a year 365 365 / Accounts Receivable turnover ratio         12.27         12.67 Days sales in receivables             29.7           28.8 c. From above ratios , it can be concluded that the Campbell Soup is little bit less efficient in collecting receivables in Year 2 as days sales receivables has increased from 34.47 days to 39.69 days.

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