Solution-Calculate receivables turnover and average

Calculate receivables turnover and average collection period

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Reference no: EM133176795

Question - The following information was taken from the 2021 financial statements of Clarke Ltd.

Description	Year 2021 (in millions)	Year 2020 (in millions)	Year 2019 (in millions)
Accounts Receivable	$150.0	$110.0	$126.0
Allowance for Doubtful Debts	6.3	5.7	8.3
Net Sales	1200.0	950.0	810.0
Total Current Assets	367.2	285.8	258.7

All sales are on credit. The industry average credit risk ratio is 3.5% and the industry average collection period is 35 days. The industry averages have been constant during 2020 and 2021.

Required -

1. Calculate the receivables turnover and average collection period for 2020 and 2021 for the entity.

2. Calculate the credit risk ratio for the entity for 2020 and 2021.

3. Comment on the entity's credit and collection policies.

Note: Formulae sheet is provided at the end of this assessment paper.

Reference no: EM133176795

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Calculate receivables turnover and average collection period

Reference no: EM133176795

Reference no: EM133176795

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