Task 1: Accounts Receivable Turnover for Coca-Cola and PepsiCo
Question 1. Calculate the accounts receivable turnover ratios for Coca-Cola and PepsiCo for 2006.
Coca-Cola PepsiCo
Net revenue = $24,088 Net revenue = $35,137
Acct receivable = $2,587 Acct receivable = $3,725
$24,088/$2,587 = 9.31 $35,137/$3,725 = 9.43
Question 2. Calculate the average collection period, in days, for both companies for 2006. Comment on the reasonableness of the collection periods for these companies considering the nature of their business.
Task 2: Effects of Changes in Receivable Balances on Statement of Cash Flow
Stegner, Inc.
Balance Sheet
For the Year Ended December 31, 2008 and 2007
12/31/08 12/31/07
Cash $105,000 $110,000
Accounts receivable 223,000 83,000
Notes receivable 95,000 100,000
Stegner reported net income of $130,000 for 2008. No other current assets or liabilities nor any investing or financing activities.
Q1. Prepare Stegner's 2008 statement of cash flows.
Stegner, Inc.
Statement of Cash Flow
For Year Ended December 31, 2008
Net income $130,000
Cash 105,000
Accounts receivable 223,000
Notes receivable 95,000
Q2. Draft a brief memo to the owner to explain why cash decreased during a profitable year.