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Account receivable
Asked Mar 10, 2007, 06:32 AM
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1 Answer I have to calculate account receivable ratio for two years Sales revenue: 2.686585 Account receivables : (2004) 291277 (2003) 271766 Having in mind that 60% of sales was on credit. I had try but the result is not correct |
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| Hi Zulay! This is the formula for calculating the ratio. Accounts Receivable Turnover Ratio = annual credit sales / average accounts receivable. Lets first find your annual credit sales which you say is 60% =0.60*2,686,585=1,611,951.00 this is your annual credit sales. Two, lets now get the average accounts receivable = 291,277 + 271,766=563,043.00/2 =281,521.50 Annual credit sales=1,611,951.00 Average accounts receivable=281,521.50 Accounts receivable turnover ratio = 1,611,951.00 /281,521.50 =5.7 A high accounts receivable turnover ratio indicates a tight credit policy. A low or declining accounts receivable turnover ratio indicates a collection problem, part of which may be due to bad debts. | ||||
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