Question

Xavier Stores Company and Lestrade Stores Inc. are large retail department stores. Both companies offer credit to their customers through their own credit card operations. Information from the financial statements for both companies for two recent years is as follows (in millions): Xavier Lestrade Sales $211,700 $295,650 Credit card receivables-beginning 37,489 68,098 Credit card receivables-ending 31,299 52,430 a. Determine the (1) accounts receivable turnover and (2) the number of days' sales in receivables for both companies. Round answers to one decimal place. Assume 365 days a year. Xavier Lestrade 1. Accounts receivable turnover 2. Number of days' sales in receivables days days b. Xavier’s accounts receivable turnover is than Lestrade’s. The number of days' sales in receivables is for Xavier than for Lestrade. These differences indicate that Xavier is able to turn over its receivables quickly than Lestrade. As a result, it takes Xavier time to collect its receivables.

Answer 1

	Xavier	Lestrade
Sales (a)	211,700	295,650
.
Receivables-beginning	37,489	68,098
Receivables-ending	+ 31,299	+ 52,430
	/ 2	/ 2
Average Accounts Receivable (b)	34,394	60,264
.
1) Accounts Receivable Turnover (a) / (b)	6.16	4.91
.
2) Number of days' sales in receivables (365 / Accounts Receivable Turnover)	59.3 (365 / 6.16)	74.3 (365 / 4.91)

.

b.

• Xavier’s accounts receivable turnover is more than Lestrade’s.
• The number of days' sales in receivables is less for Xavier than for Lestrade.

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