Question

BTN 6-1 Refer to Apple’s financial statements in Appendix A to answer the following.

3. Compute the days’ sales uncollected (rounded to two decimals) as of September 26, 2015, and September 27, 2014. Has the collection of receivables improved? Are accounts receivable an important asset for Apple? Explain. Fast Forward

Short answer

The number of days of uncollected sales in accounts receivable has decreased from 161.30 days to 115.18 days. This decrease of 46.12 days indicates that the company’s assets are tied up in receivables for a shorter period; further, this difference is material.

Step-by-step solution

Meaning of Days’ Sales Uncollected

Days' sales uncollected ratio is used to determine the number of days after which the money is received from the debtors against the credit sales.

Days' Sales Uncollected-

$$\begin{gathered} \text{Day's sales uncollected (Sep 26, 2015) =}\frac{\text{Accounts Receivables}}{\text{Net Sales}}\times 365 \\ =\frac{16,849}{53,394}\times 365 \\ =115.18\text{days} \end{gathered}$$

$$\begin{gathered} \text{Day's sales uncollected (Sep 27, 2014) =}\frac{\text{Accounts Receivables}}{\text{Net Sales}}\times 365 \\ =\frac{17,460}{39,510}\times 365 \\ =161.30\text{days} \end{gathered}$$

Accounts receivable an important asset-

Yes, Accounts receivable for fiscal 2014 represent 19.54% ($17,460/ $89,378) of its current assets and 6.01% ($17,460/ $290,479) of its total assets. The company’s receivables are historically high because most sales are made on credit.