5. Marbel had $2,816 million in sales and $555 million in ending accounts receiv

Question

5. Marbel had $2,816 million in sales and $555 million in ending accounts receivable for the current period. For the same period, Maxtel reported $4,885 million in sales and $491 million in ending accounts receivable. Calculate the days' sales uncollected for both companies as of the end of the current period. Which company is doing a better job of collecting its receivables in a timely manner? Three (3) points Marbel Days' Sales Uncollected Maxtel Days' Sales Uncollected- Which company is doing a better job of collecting its receivables in a timely manner?

Explanation / Answer

Days' sales uncollected is a measurement used to estimate the number of days before receivables will be collected. This information is used by creditors and lenders to determine the short-term liquidity of a company. It can also be used by management to estimate the effectiveness of its credit and collection activities. The formula is:

(Accounts receivable ÷ Net annual credit sales) x 365

Marble Days sales uncollected= (5555/2816)*365 = 720

Maxtel Days sales uncollected= (491/4885)*365 =36.69

Maxtel company is doing better job of collecting its receivables in a timely manner.

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