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: Direct Write-off Method

Financial Accounting

7. Receivables and Investments

Net Accounts Receivable: Direct Write-off Method

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Multiple Choice

The formula to compute the receivables turnover ratio is net credit sales divided by:

Total assets

Gross accounts receivable

Average net accounts receivable

Net income

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Verified step by step guidance

Understand the receivables turnover ratio: It measures how efficiently a company collects its receivables during a given period. The formula is: Receivables Turnover Ratio = Net Credit Sales / Average Net Accounts Receivable.

Identify the numerator: Net Credit Sales refers to the revenue generated from credit sales after deducting any returns or allowances. Ensure you have this value from the financial statements.

Identify the denominator: Average Net Accounts Receivable is calculated by taking the sum of the beginning and ending net accounts receivable balances for the period and dividing by 2. This provides an average value for the accounts receivable over the period.

Set up the formula: Using MathML, the formula can be expressed as:

\frac{Net Credit Sales}{Average Net Accounts Receivable}

. Plug in the values for Net Credit Sales and Average Net Accounts Receivable into the formula.

Interpret the result: Once calculated, the receivables turnover ratio indicates how many times the company collects its average receivables during the period. A higher ratio suggests efficient collection, while a lower ratio may indicate issues with receivables management.