XYZ's receivables turnover is 4x. The accounts receivable at year-end are $600,000. The average collection period is 90 days. What was the sales figure for the year assuming all sales are on credit?
A)$60,000
B)$6,000,000
C)$2,400,000
D)None of the options

Question

Quizplus · Accepted Answer

Receivables Turnover = Sales / Accounts Receivable 
4 = Sales / $600,000 
Sales = $2,400,000

Average Collection Period = 365 / Receivables Turnover 
90 days = 365 / 4 
So, the company takes 90 days to collect its receivables.

Therefore, if the accounts receivable at year-end were $600,000, the sales figure for the year must have been $2,400,000 (4 times the accounts receivable amount).

XYZ's Receivables Turnover Is 4x