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29 September, 22:34

Below are amounts (in millions) from three companies' annual reports. Beginning Accounts Receivable Ending Accounts Receivable Net SalesWalCo $1,795 $2,742 $320,427 TarMart 6,066 6,594 65,878 CostGet 609 645 66,963 Required:1. Calculate the receivables turnover ratio and the average collection period for WalCo, TarMart and CostGet. (Do not round intermediate calculations. Enter your answers in millions. Round your "Average accounts receivable" and "Receivables turnover ratio" answers to one decimal place.) 2. Which company appears most efficient in collecting cash from sales? a) WalCob) TarMartc) CostGetWalCo TarMart CostGet WalCo TarMart CostGet Net sales Receivables Turnover Ratio Average accounts receivable Receivables turnover ratio times times times Average Collection Period Average collection period days days days

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  1. 29 September, 23:54
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    1. Calculate the receivables turnover ratio and the average collection period for WalCo, TarMart and CostGet.

    WalCo = 70.63 TarMart = 10.41 CostGet = 106.80

    2. Which company appears most efficient in collecting cash from sales?

    CostGet because its average collection period is shortest

    Explanation:

    Beginning Accounts Ending Accounts Net Sales

    Receivable Receivable

    WalCo $1,795 $2,742 $320,427

    TarMart $6,066 $6,594 $65,878

    CostGet $609 $645 $66,963

    accounts receivable turnover ratio = net sales / average accounts receivable

    WalCo = $320,427 / [ ($1,795 + $2,742) / 2] = 70.63

    TarMart = $65,878 / [ ($6,066 + $6,594) / 2] = 10.41

    CostGet = $66,963 / [ ($609 + $645) / 2] = 106.80

    average collection period = 365 / accounts receivable turnover ratio

    WalCo = 365 / 70.63 = 5.17 days

    TarMart = 365 / 10.41 = 35.06 days

    CostGet = 365 / 106.80 = 3.42 days
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