Question

universal sports supply began the year with an accounts receivable balance of $190,000 and a year-end balance of $210,000. credit sales of $465,000 generate a gross profit of $155,000. calculate the receivables turnover ratio for the year. hint: accounts receivable turnover

Answer 1

The accounts receivable turnover ratio measures the number of times a company's accounts receivable is collected during a period. It is calculated by dividing net credit sales by the average accounts receivable balance. Here is how to calculate the ratio for Universal Sports Supply:

Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable

We first need to calculate the average accounts receivable balance:

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2

Average Accounts Receivable = ($190,000 + $210,000) / 2

Average Accounts Receivable = $200,000

Next, we can calculate net credit sales by subtracting the cost of goods sold from gross profit:

Net Credit Sales = Gross Profit / Gross Profit Margin

Net Credit Sales = $155,000 / ($155,000 + Cost of Goods Sold)

We are given that the gross profit is $155,000, but we do not have information about the cost of goods sold. Therefore, we cannot calculate the net credit sales or the accounts receivable turnover ratio.

In order to calculate the accounts receivable turnover ratio, we would need to know the cost of goods sold or have additional information about the company's operations.