Apple Inc. designs, manufactures, and markets personal computers and related per

Question

Apple Inc. designs, manufactures, and markets personal computers and related personal computing amd communicating solutions for sale primarily to education, creative, consumer, and buisness customers. Substantially all of the company's sales over the last five years are from sales of its Macs, iPods, iPads, and related software and peripherals. For two recent fiscal years, Apple reported the following (in millions):

Sales: Year 2: $156,508, Year 1: $108,249

Accounts receivable at the end of year: Year 2: $21,275, Year 1: $13,731

Assume that the accounts receivable (in millions) were $11,560 at the beginning of fiscal Year 1.

1) Compare the accounts receivable turnover for Year 2 and Year 1. Round to one decimal place.

2) Compare the days' sales in receivables at the end of Year 2 and Year 1. Use 365 days and round to one decimal place.

3) What conclusions can be drawn from (1) and (2) regarding Apple's efficency in collecting receivables?

Explanation / Answer

accounts receivable turnover => Net sales / Average receivalbe

Year 1 => 108249 / (11560 + 13731) /2

=> 8.56 times

Year 2 => 156508 / (13731 + 21275)/2

=> 8.94 times

Answer 2

days' sales in receivables=> (Accounts receivable / Net sales) * Number of days in the year

Year1=> (34731 / 108249) *365

Year 1 => 46.3 days

Year 2 => (21275 / 156508) * 365

Year 2 => 49.6 days

Answwer 3

Apple's efficency in collecting receivables has been reduced as days to collect receivbales in year 2 has increased by around 3days, but tournover ratio is increase in year 2 which is a positive sign, so in overall i would say company is doing well and is effecient .

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