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Blue Air Inc., has net sales of $704,000 and accounts receivables of $162,000. What are the...

Blue Air Inc., has net sales of $704,000 and accounts receivables of $162,000. What are the firm's accounts receivables turnover?

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Answer #1

Accoounts receivables turnover measures how many times in a given period is the company able to convert its receivables in to cash. It thus measures the efficiency of the company in managing its receivables.

Accounts receivables turnover = Net Credit Sales/ Accounts receivables

Considering all of Blue Air Inc. sales were on credit then, Net credit sales = $704,000
Accounts receivables = $162,000

Accounts receivables turnover = 704000/162000
   = 4.35

Higher turnover ratio indicates that the company has been able to collect its amount due more frequently. A turnover of 4.35 means that Blue AIr has been collecting its receivables every 2.8 months.

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