The following information is available from Avalon, Inc. for the current year:
During the year, the average number of days to sell inventory was 76.1 days. Required:Calculate the following. (Round your answers to one decimal place.)a) Accounts receivable turnover ratiob) Average number of days to collect accounts receivablec) Length of operating cycled) Net cash flow from sales
What will be an ideal response?
a) 10.0 times
b) 36.5 days
c) 108.1 days
d) $379,850
a) Accounts receivable turnover ratio = Sales of $375,000 ÷ Net accounts receivable of $37,500 = 10.0 times
b) Average number of days to collect accounts receivable = 365 ÷ Accounts receivable turnover ratio of 10.0 = 36.5 days
c) Operating cycle = Average number of days to collect receivables of 36.5 days + Average number of days to sell inventory of 71.6 days = 108.1 days
d) Cash inflow from sales = Sales on account of $375,000 + Decrease in accounts receivable of ($42,350 ? $37,500) = $379,850
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