The financial statements of Danielle Manufacturing Company r

The financial statements of Danielle Manufacturing Company report net sales of $600,000 and accounts receivable of $60,000 and $90,000 at the beginning and end of the year, respectively. What is the receivables turnover ratio for Danielle? 4 times 6.67 times 8 times 10 times

Solution

Receivable turnover ratio = Turnover / Average account receivables
= $600,000 / [($60000 + $90000) / 2]
= $600,000 / $75,000
= 8 times
Hence the answer is C.) 8 times.

Average collection period for account receivables = 365 days / Receivable turnover ratio
= 365 / 8
= 45.625 or 45.6 days