Multiple Choice
The accounts receivable turnover ratio measures:
33
views
14. Financial Statement Analysis
Ratios: Accounts Receivable (AR) Turnover
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
ABC Company had $200,000 in Net Sales and Gross Profit of $80,000. If AR had a balance of $16,000, what is the AR Turnover ratio?
A
5
B
7.5
C
12.5
D
Not enough information
Verified step by step guidance1
Understand the concept of Accounts Receivable (AR) Turnover Ratio: It measures how efficiently a company collects revenue from its credit sales. The formula is: \( \text{AR Turnover Ratio} = \frac{\text{Net Sales}}{\text{Average Accounts Receivable}} \).
Identify the given values: Net Sales is $200,000 and the balance of Accounts Receivable (AR) is $16,000.
Assume that the balance of AR given is the average AR for the period, as no other information is provided.
Apply the formula: Substitute the given values into the AR Turnover Ratio formula: \( \text{AR Turnover Ratio} = \frac{200,000}{16,000} \).
Calculate the AR Turnover Ratio using the substituted values to find how many times the company turns over its receivables in a period.
7:40mWatch next
Master Ratios: Accounts Receivable (AR) Turnover with a bite sized video explanation from Brian
Start learningRelated Videos
Related Practice
Ratios: Accounts Receivable (AR) Turnover practice set
Problem sets built by lead tutorsExpert video explanations