Question

The following data are taken from the comparative balance sheets of Ruggers Company. Compute and interpret its accounts receivable turnover for year 2017 (competitors average a turnover of 7.5).

Short answer

The accounts receivables turnover for the year 2017 is 5.9 times.

Step-by-step solution

Computation of accounts receivables turnover for the year 2017

$\begin{array}{rcl}\mathrm{Accounts}\mathrm{receivable}\mathrm{turnover}& =& \frac{\mathrm{Net}\mathrm{sales}}{\mathrm{Average}\mathrm{accounts}\mathrm{receivables}}\\ & =& \frac{\$861,105}{\$145,950}\\ & =& 5.9\mathrm{times}\end{array}$

Working notes

$\begin{array}{rcl}\mathrm{Average}\mathrm{accounts}\mathrm{receivables}& =& \frac{\mathrm{Accounts}\mathrm{receivables}\mathrm{for}2017+\mathrm{Accounts}\mathrm{receivables}\mathrm{for}2016}{2}\\ & =& \frac{\$153,400+\$138,500}{2}\\ & =& \frac{\$291,900}{2}\\ & =& \$145,950\end{array}$