Selected data from the financial statements are provided below:

-Refer to Rainsoft Company. Assume that competitors in the industry have an average accounts receivable turnover ratio of 7.8 times in 2021. What is the company's accounts receivable turnover ratio for 2021?
A)5.26
B)7.62
C)7.80
D)8.91

Question

Selected data from the financial statements are provided below:
 
-Refer to Rainsoft Company. Assume that competitors in the industry have an average accounts receivable turnover ratio of 7.8 times in 2021. What is the company's accounts receivable turnover ratio for 2021?
A)5.26 
B)7.62 
C)7.80 
D)8.91

Quizplus · Accepted Answer

Using the formula, accounts receivable turnover ratio = net credit sales / average accounts receivable, we can calculate Rainsoft Company's accounts receivable turnover ratio for 2021. 
Net credit sales = $125,000 
Average accounts receivable = ($20,000 + $16,000) / 2 = $18,000 
Accounts receivable turnover ratio = $125,000 / $18,000 = 6.94 
Since the competitors in the industry have an average accounts receivable turnover ratio of 7.8 times in 2021, we can see that Rainsoft Company's accounts receivable turnover ratio is lower than the industry average. Therefore, the best choice is B) 7.62, which is not listed as an option but is the closest to the industry average.

Selected Data from the Financial Statements Are Provided Below