Norman Co. had $5,925 million in sales and $1,155 million in ending accounts receivable for the current period. For the same period, Opal Co. reported $5,885 million in sales and $790 million in ending accounts receivable. Calculate the days' sales uncollected for both companies as of the end of the current period and indicate which company is doing a better job in managing the collection of its receivables.
What will be an ideal response?
Days' Sales Uncollected Ratio = Ending Accounts Receivable/Net Credit Sales * 365
Norman: ($1,155 million/$5,925 million) × 365 = 71.2 days
Opal: ($790 million/$5,885 million) × 365 = 49.0 days
Opal is doing a better job of collecting its receivables in a timely manner.
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