Aguilera Corp. has a current accounts receivable balance of $337,800. Credit sal

Question

Aguilera Corp. has a current accounts receivable balance of $337,800. Credit sales for the year just ended were $4,644,750. What is the company's receivables turnover? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) What is the company's day's sales in receivables? (Use 365 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) How long did it take on average for credit customers to pay off their accounts during the past year? (Use 365 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Explanation / Answer

Receivable's TurnoverRatio = Net credit sales/Avg account receivable = 4644750/337800 = 13.75

Day's sales in receivables = No. of days in a year/accounts receivable turnover ratio = 365/13.75 = 26.54

The days' sales in accounts receivable ratio, also known as the number of days of receivables, tells you the average number of days it takes to collect an account receivable.

Avg collection period = Days * Account Receivable/Credit sales = 365*337800/4644750 = 26.54

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