Selected data from the financial statements are provided below:
Refer to Rainsoft Company

-Refer to Rainsoft Company. Assume that competitors in the industry have an average accounts receivable turnover ratio of 7.8 times in 2015. What is the company's accounts receivable turnover ratio for 2015?

Question

Selected data from the financial statements are provided below:
Refer to Rainsoft Company
 
-Refer to Rainsoft Company. Assume that competitors in the industry have an average accounts receivable turnover ratio of 7.8 times in 2015. What is the company's accounts receivable turnover ratio for 2015?

Quizplus · Accepted Answer

To calculate the accounts receivable turnover ratio, divide the net credit sales by average accounts receivable. Using the figures given in the financial statements, the net credit sales for 2015 is $626,000 and the average accounts receivable for 2015 is $82,900. Therefore, the accounts receivable turnover ratio for 2015 is 7.55 times ($626,000 ÷ $82,900). Since the industry average accounts receivable turnover ratio is 7.8 times, the company's ratio is below average, indicating that it is taking longer to collect its accounts receivable compared to its competitors. The closest choice is B, which is the only option that falls between 7.5 and 7.9.

Selected Data from the Financial Statements Are Provided Below