Below are amounts for two companies: ?Beginning Accounts Receivable (net)Ending Accounts Receivable (net)Net SalesCompany 1$1,500$1,200$29,700Company 23,1003,30080,000For each company, calculate the receivables turnover ratio. Which company appears more efficient in collecting cash from sales?
What will be an ideal response?
Company 1 = 22; Company 2 = 25; Company 2 is more efficient.
Company 1 = $29,700/[($1,500 + $1,200)/2] = 22.
Company 2 = $80,000/[($3,100 + $3,300)/2] = 25.
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