The following data are taken from the financial statements of Tall Tail Company.
2007 2006
Accounts receivable (net), end of year $ 560,000 $ 540,000.Net sales on account 4,700,000 4,000,000
Terms for all sales are 1/10, n/45.At the end of 2005, accounts receivable was $500,000.
Instructions
Compute for each year
(a) the receivables turnover ratio and (b) the average collection period.What conclusions about the management of accounts receivable can be drawn from these data?