Question

Suppose the following information was taken from the 2017 financial statements of FedEx Corporation, a major global transportation/delivery company. (in millions)

2017 2016
Accounts receivable (gross) $3,773 $4,675
Accounts receivable (net) 3,638 4,358
Allowance for doubtful accounts 135 317
Sales revenue 33,080 41,218
Total current assets 7,196 7,502

Required:
Calculate the accounts receivable turnover and the average collection period for 2017 for FedEx Corporation.

Answer 1

Answer:

8.27 times and 44.13 days

Explanation:

The computations are shown below:

As we know that

Account receivable turnover ratio = Net credit sales ÷ Average accounts receivable  

where,  

Net credit sales is $33,080

And, the Average accounts receivable would be

= (Accounts receivable, beginning of year + Accounts receivable, end of year) ÷ 2

= ($3,638 + $4,358) ÷ 2

= $3,998

So, the accounts receivable turnover ratio would be

= $33,080 ÷ $3,998

= 8.27 times

And the average collection period is

= 365 days ÷ accounts receivable turnover

= 365 days ÷ 8.27 times

= 44.13 days