The following data are taken from the comparative balance sheets of Grayling Company. Compute and interpret its accounts receivable turnover for Year 2. Competitors average a turnover of 7.5. How is the company doing in relation to its competitors?

What will be an ideal response?



?Year 2Year 1
Accounts receivable, net180,230220,450
Net sales1,500,7501,495,600

Accounts Receivable Turnover = Net Sales/Average Accounts Receivable
   Accounts Receivable Turnover = $1,500,750/[(180,230 + 220,450)/2] = 7.5 times

Grayling's turnover is the same as the industry average. The company is doing the same as competitors in receivables turnover for the year. The turnover should also be compared with prior years' results for the company to determine if the company is making improvement internally.

Business

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