Please analyze and comment on the presentation of the accoun

Please, analyze and comment on the presentation of the accounts receivable and ADA. Comment on the two year trend in Accts Receivable amounts and Days to Collect.

Solution

Accounts Receivable Turnover ratio - shows how quickly receivables are converted into cash and cash equivalents. In other words, it shows the efficiency in collection of amounts due from debtors. A high ratio is better since it indicates that debts are collected more promptly. In the above case, Accounts Receivable Turnover are increasing year on year. In 2014 it is 5.6, 2015 - it is 5.9 and 2016 it is 6.4. This Shows that the company are collecting the cash very effectively by giving more discoyunts aor sticter credit policies. Days to collect - It shows the avarage time that the company takes to collect the debtors. In this case it shows that average debt collecton period is reduced from 65.20 days (in 2014) to 57 days (in 2016). It shows that company is taking less time in collecting cash from debtors.