The asset side of the 2014 and 2013 balance sheet for leggett & platt is below.
ID: 2482515 • Letter: T
Question
The asset side of the 2014 and 2013 balance sheet for leggett & platt is below. The company reported net sales of $4,076.1 million in 2014 and $4,250 million in 2013. Use this information to answer the LEGGETT & PLATT, INCORPORATED Consolidated Balance Sheets December 31 (in millions) 2014 2013 Cash and cash equivalents $ 164.7 $205.4 Accounts and other receivable, net of allowance of $27.5 and $18.2 550.5 640.2 Finished goods 309.4 348.3 Work in process 46.8 54.2 Raw materials and supplies 268.1 260.4 LIFO reverse (127.3) (63.7) Total inventories, net 495.0 599.2 Other current assets 65.6 104.6 Current assets held for sale 31.0 285.0 Total current assets 1,306.8 1,834.4 Machinery and equipment 1,103.4 1,157.7 Buildings and other 592.7 603.6 Land 44.7 49.7 Total property, plant and equipment 1,740.8 1,811.0 Less accumulated depreciation 1,059.4 1,084.1 Net property, plant and equipment 681.4 726.9 Goodwill 875.6 931.3 Other intangibles, less accumulated amortization of $76.9 and $65.9 at December 31, 2014 and 2013, respectively 197.4 232.2 Sundry 70.5 78.2 Non-current assets held for sale 30.2 269.5 TOTAL ASSETS $3,161.9 $4,072.5 Required: Compute the accounts receivable turnover for 2014 and 2013. At December 31, 2012, accounts and other receivables, net were $853.8 million. Compute the average number of days that the receivables were oustanding in each year. Does the number of days to collect receivables seem appropriate for Leggett & Platt? How could Leggett & Platt improve its accounts receivable turnover?Explanation / Answer
A./
ACCOUNTS RECEIVABLE TURN OVER RATION 2013
= NET CREDIT SALES / AVERAGE ACCOUNTS RECEIVABLE
= $4250 / [($853.8 + $640.2) / 2]
= $4250 / $747
= 5.69 DAYS
ACCOUNTS RECEIVABLE TURN OVER RATIO 2014
= NET CREDIT SALES / AVERAGE ACCOUNTS RECEIVABLE
= $4076.1 / [($640.2 + $550.5) / 2]
= $4076.1 / $1190.7
= 3.42 DAYS
B./
NUMBER OF DAYS RECEIVABLE OUTSTANDING 2013
= ACCOUNTS RECEIVABLE / NET CREDIT SALES * 365
= $640.2 / 4250 * 365
= 54.98 DAYS OR 55 DAYS
NUMBER OF DAYS RECEIVABLE OUTSTANDING 2014
= ACCOUNTS RECEIVABLE / NET CREDIT SALES * 365
= $550.5 / $4076.1 * 365
= 49.30 DAYS
C./
NO, THE NUMBER OF DAYS TO COLLECT RECEIVABLE SEEMS INAPPROPRIATE FOR LEGGET & PLATT.
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