Question

Suppose the amounts presented here are basic financial information (in millions) from the 2019 annual reports of Nike and Adidas.

		Nike		Adidas
Sales revenue		$20,476.5		$11,080.8
Allowance for doubtful accounts, beginning		78		120
Allowance for doubtful accounts, ending		110		122
Accounts receivable balance (gross), beginning		2,862		1,750
Accounts receivable balance (gross), ending		2,936		1,570

Calculate the accounts receivable turnover for both companies.

Calculate the average collection period for both companies.

Answer 1

Accounts Receivable Turnover Ratio

Accounts Receivable Turnover Ratio = Net Sales / Average Accounts Receivables

NIKE

= $20,476.50 / [{($2,862 – 78) + (2,936 - 110)}/2]

= $20,746.50 / $2,805

= 7.30 Times

ADIDAS

= $11,080.80 / [{($1,750 - 120) + (1,570 - 122)}/2]

= $11,080.80 / $1,539

= 7.20 Times

Average Collection Period

Average Collection Period = 365 Days / Accounts Receivable Turnover Ratio

NIKE

= 365 Days / 7.30 Times

= 50 Days

ADIDAS

= 365 Days / 7.20 Times

= 50.69 Days