Question: Obtain a copy of the annual report of Avon Products, Inc., for the most recent year. You can find the annual report at the company's website ( www.avon.com) in the investor information section or at the Securities and Exchange Commission's website ( www.sec.gov) using EDGAR (Electronic Data Gathering, Analysis, and Retrieval). Form 10-K, which includes the annual report, is required to be filed on EDGAR. Search or scroll within the annual report to find the financial statements.
Required: Answer the following questions related to the company's accounts receivable and bad debts:
1. What is the amount of net accounts receivable at the end of the year? What is the amount of total accounts receivable?
2. What is the amount of bad debt expense for the year? ( Hint: Check the statement of cash flows.)
3. Determine the amount of actual bad debt write-offs made during the year. Assume that all bad debts relate only to trade accounts receivable. Did the company underestimate or overestimate bad debts?
4. Calculate the receivables turnover ratio and average collection period for the most recent year. Assuming the industry averages for the receivables turnover ratio and average collection period are 10.5 times and 34.8 days, respectively, what do you conclude about the receivables of Avon?