Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Ratios: Accounts Receivable (AR) Turnover

Financial Accounting

14. Financial Statement Analysis

Ratios: Accounts Receivable (AR) Turnover

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Accounts receivable turnover is calculated using which of the following formulas?

\( \text{Average Accounts Receivable} \div \text{Net Credit Sales} \)

\( \text{Net Credit Sales} \div \text{Average Accounts Receivable} \)

\( \text{Gross Sales} \div \text{Average Accounts Receivable} \)

\( \text{Net Sales} \div \text{Ending Accounts Receivable} \)

Previous problemNext problem

Verified step by step guidance

Understand the concept of accounts receivable turnover: It measures how efficiently a company collects revenue from its credit sales. The formula typically involves net credit sales and average accounts receivable.

Identify the correct formula: The accounts receivable turnover ratio is calculated as \( \text{Net Credit Sales} \div \text{Average Accounts Receivable} \). This formula reflects the number of times the company collects its average accounts receivable during a period.

Clarify the components: Net credit sales represent the total sales made on credit minus any returns or allowances. Average accounts receivable is calculated as \( \frac{\text{Beginning Accounts Receivable} + \text{Ending Accounts Receivable}}{2} \).

Compare the options provided: The correct formula is \( \text{Net Credit Sales} \div \text{Average Accounts Receivable} \). Other options, such as gross sales or ending accounts receivable, do not accurately measure turnover.

Apply the formula in practice: To calculate the accounts receivable turnover ratio, ensure you have the values for net credit sales and average accounts receivable, then divide net credit sales by average accounts receivable using the formula.