To determine accounts receivable turnover, net sales are divided by
A) beginning net accounts receivable.
B) average gross receivables.
C) cost of goods sold.
D) 365 days.

Question

Quizplus · Accepted Answer

The accounts receivable turnover ratio is calculated by dividing net sales by average gross receivables. This formula takes into account the average amount of money owed to the company during the period being analyzed. Dividing by beginning net accounts receivable or cost of goods sold would not provide an accurate representation of how quickly the company is collecting its outstanding debts. Dividing by 365 days would give an average collection period but would not take into account the level of sales during that time period.

To Determine Accounts Receivable Turnover, Net Sales Are Divided by