Question

Blossom Corp. currently has accounts receivable of $1,310,000 on net sales of $5,546,000. What are its accounts receivable turnover ratio and days’ sales outstanding (DSO)? (Round accounts receivable turnover ratio answer to 2 decimal places, e.g. 12.25 and days’ sales outstanding answer to 1 decimal place, e.g. 12.2. Use 365 days for calculation.)

Answer 1

Answer:

Blossom Corp.'s accounts receivable turnover ratio is 4.23 times

Days’ sales outstanding (DSO) of the company is 86.3 days

Explanation:

The accounts receivable turnover ratio is an efficiency ratio that measures how many times a company can collect its receivables or money owed by clients during the year.

Accounts receivable turnover  ratio is calculated by following formula:

Accounts Receivable Turnover ratio = Net Credit Sales /Accounts Receivable  = $5,546,000/$1,310,000 = 4.23 times

Days’ sales outstanding (DSO) = 365/Accounts receivable turnover ratio = 365/4.23 = 86.3 days