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universal sports supply began the year with an accounts receivable balance of $130,000 and a year-end balance of $150,000. credit sales of $555,000 generate a gross profit of $185,000. calculate the receivables turnover ratio for the year. (round your final answer to 1 decimal place.)

Answer :

Receivables Turnover Ratio is 3.96 . Hence the final answer is 3.96.

Receivables Turnover Ratio = Credit Sales/Average Accounts Receivable

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

Average Accounts Receivable = ($130,000 + $150,000)/2 = $140,000

Receivables Turnover Ratio = $555,000/$140,000 = 3.96

Receivables Turnover Ratio = 3.96 (to 1 decimal place)

Accounts Receivable Turnover ratio indicates how many times the accounts receivables have been collected during an accounting period. It can be used to determine if a company is having difficulties collecting sales made on credit. The higher the turnover, the faster the business is collecting its receivables.

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