Question

BTN 6-2 Key comparative figures for Apple and Google follow.

\( millions Current Year Prior Year Current Year Prior Year

Accounts receivable . . . . . . . . . . . . \) 16,849 \( 17,460 \)11,556 $ 9,383

Net sales . . . . . . . . . . . . . . . . . . . . . 233,715 182,795 74,989 66,00

Required

Compute days’ sales uncollected (rounded to two decimals) for these companies for each of the two years shown. Comment on any trends for the companies. Which company has the largest percent change (rounded to two decimals) in days’ sales uncollected?

Short answer

Answer

Apple’s day’s sales uncollected have decreased by 46.12 days.The percent decrease is: (115.18- 161.30) / 161.30 = 0.29%

Google’s days’ sales uncollected have increased by 284.27days. The percent increase is: (542.27 – 258) / 258 = 1.10%.

Step-by-step solution

Step-by-Step SolutionStep 1: Meaning of Days’ Sales Uncollected

Days' sales uncollected ratio is used to determine the number of days after which the entity will collect the receivables from debtors.

Days' Sales Uncollected of Apple-

$$\begin{gathered} Day\text{'}ssalesuncollected(Sep26,2015)=\frac{AccountsReceivables}{NetSales}\times 365 \\ =\frac{16,489}{53,394}\times 365 \\ =115.18days \\ Day\text{'}ssalesuncollected(Sep27,2014)=\frac{AccountsReceivables}{NetSales}\times 365 \\ =\frac{17,460}{39,510}\times 365 \\ =161.30days \end{gathered}$$

Days' Sales Uncollected of Google-

$$\begin{gathered} Day\text{'}ssalesuncollected(Sep26,2015)=\frac{AccountsReceivables}{NetSales}\times 365 \\ =\frac{11,556}{16,348}\times 365 \\ =258days \\ Day\text{'}ssalesuncollected(Sep27,2014)=\frac{AccountsReceivables}{NetSales}\times 365 \\ =\frac{9,383}{14,136}\times 365 \\ =542.27days \end{gathered}$$

Comparative Analysis:

Google’s increase in days’ sales uncollected is 1.10%, which is a marked unfavourable trend compared with Apple’s decrease of 0.29%. Google has failed to successfully manage the number of days’ sales uncollected relative to the prior year. However, it is important to remember that Google’s accounts receivable has not been a large asset for this company.