Question

Suppose the amounts presented here are basic financial information (in millions) from the 2022 annual reports of Nike and Adidas.

		Nike		Adidas
Sales revenue		$20,235.6		$11,723.8
Allowance for doubtful accounts, beginning		71.0		111.0
Allowance for doubtful accounts, ending		102.0		112.0
Accounts receivable balance (gross), beginning		2,804.0		1,806.0
Accounts receivable balance (gross), ending		2,913.0		1,629.0

1. Calculate the accounts receivable turnover for both companies.

2. Calculate the average collection period for both companies.

Answer 1

	Nike	Adidas
Accounts receivable balance (gross), beginning	2,804.00	1,806.00
Allowance for doubtful accounts, beginning	71	111
Accounts receivable balance, beginning Net (A)	2,733.00	1,695.00
Accounts receivable balance (gross), ending	2,913.00	1,629.00
Allowance for doubtful accounts, ending	102	112
Accounts receivable balance, ending Net (B)	2,811.00	1,517.00
Average accounts receivable {(A+B)/2}	2,772.00	1,606.00

1.

For Nike

Accounts receivable turnover = Sales / Average accounts receivable

= 20,235.6/2,772

= 7.3 times

For Adidas

Accounts receivable turnover = Sales / Average accounts receivable

= 11,723.8/1,606

= 7.3 times

2.

For Nike

Average collection period = 365/ Accounts receivable turnover

= 365/7.3

= 50 days

For Adidas

Average collection period = 365/ Accounts receivable turnover

= 365/7.3

= 50 days