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

7. Receivables and Investments

Net Accounts Receivable: Percentage of Sales Method

Financial Accounting

7. Receivables and Investments

Net Accounts Receivable: Percentage of Sales Method

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Multiple Choice

Which of the following formulas is used to calculate 'days sales uncollected'?

\( \frac{\text{Accounts Receivable}}{\text{Net Sales}} \times 365 \)

\( \frac{\text{Accounts Receivable}}{\text{Total Assets}} \times 100 \)

\( \frac{\text{Net Sales}}{\text{Accounts Receivable}} \times 365 \)

\( \frac{\text{Net Income}}{\text{Net Sales}} \times 100 \)

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Verified step by step guidance

Understand the concept of 'days sales uncollected': This metric measures the average number of days it takes for a company to collect payment after a sale. It is an indicator of the efficiency of the company's accounts receivable management.

Identify the correct formula: The formula for 'days sales uncollected' is \( \frac{\text{Accounts Receivable}}{\text{Net Sales}} \times 365 \). This formula calculates the number of days sales remain in accounts receivable before being collected.

Break down the formula components: \( \text{Accounts Receivable} \) represents the amount owed to the company by customers for credit sales. \( \text{Net Sales} \) refers to the total revenue from sales after deducting returns, allowances, and discounts. The multiplier 365 converts the ratio into days.

Compare the given options: Evaluate each formula provided in the problem and match it with the correct formula for 'days sales uncollected'. The correct formula is \( \frac{\text{Accounts Receivable}}{\text{Net Sales}} \times 365 \).

Apply the formula in practice: To calculate 'days sales uncollected', divide the accounts receivable by net sales, then multiply the result by 365 to express the value in days.