List the errors in the determination of the three measures of current position a

Question

List the errors in the determination of the three measures of current position analysis. Is the company satisfying the terms of the bond indenture? The following data are taken from the financial statements of Technology Terms of all sales are 2/10,n/60. Determine for each year(1) the accounts receivable turnover and (2) the number of sales in receivables. Round to nearest dollar and one decimal place. What conclusions can be drawn from these date concerning accounts receivable and credit policies? Xavier Stores Company and Lestrade Stores, Inc., are large retail department stores. Both companies offer credit to their customers through their own credit card .Information from the financial statements for both companies for two recent years is as follows (all numbers are in millions); List the errors in the determination of the three measures of current position analysis. Is the company satisfying the terms of the bond indenture? The following data are taken from the financial statements of Technology Terms of all sales are 2/10,n/60. Determine for each year(1) the accounts receivable turnover and (2) the number of sales in receivables. Round to nearest dollar and one decimal place. What conclusions can be drawn from these date concerning accounts receivable and credit policies? Xavier Stores Company and Lestrade Stores, Inc., are large retail department stores. Both companies offer credit to their customers through their own credit card .Information from the financial statements for both companies for two recent years is as follows (all numbers are in millions);

Explanation / Answer

Accounts receivable Turnver ratio = Net credit sale / Average net receivable For 2010 = 975,000 / 152,750 = 6.38 times For 2009 = 900,000 / 160,000 = 5.63 times Number of days sales in receivables = 365 / accounts receivable turnover ratio For 2010 = 365 / 6.38 = 57.21 days For 2009 = 365 / 5.63 = 64.83 days (b) The conclusion from the data can be drawn as under: - Average receivable turnover ratio has increased from 5.63 times to 6.38 times - The number of days outstanding has reduced from 64.83 days to 57.21 days. Yhis indicate that the company has increased the sales but also has controlled the credit limits and collected the dues intime.

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