[jayb09]

Hello,

I just want to double check my work.

Question 1
Assessing How Well Companies Manage Their Receivables
Assume that Hickory Company has the following data related to its accounts receivable:
2005 2006
Net sales.. . $1,425,000 $1,650,000
Net receivables:
Beginning of year.. . 375,000 333,500
End of year.. . 420,000 375,000
Use these data to compute accounts receivable turnover ratios and average collection periods
for 2005 and 2006. Based on your analysis, is Hickory Company managing its receivables
better or worse in 2006 than it did in 2005

My answer is
Average Collection Period = (days in the period * average accounts receivable) / net credit sales
Accounts Receivable Turnover = net credit sales / average accounts receivable

Average collection period is 101.8 for 2005 Average receivable turnover ratio = 1.8
Average collection period is 78.36 for 2006 Average receivable turnover ratio = 2.32

A higher turnover rate generally indicates less investment in accounts receivable because customers are paying more quickly so 2005 would have been a better year?

Thanks! I have another question as well but I will post that later since this one is so long

[uttie_vn]

Sorry but could you please give full of solution of average receivable turnover ratio above