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Compute the days sales in receivables at the end of year

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Best Buy is a specialty retailer of consumer electronics, including personal computers, entertainment software, and appliances. Best Buy operates retail stores in addition to the Best Buy, Media Play, On Cue, and Magnolia Hi-Fi websites. For two recent years, Best Buy reported the following (in millions):

                                                                                      Year 2         Year 1

Sales                                                              $39,528    $40.339

Accounts receivable at end of year                         1,162     1,280

Assume that the accounts receivable (in millions) were $1,308 at the beginning of fiscal Year 1.

Question 1: Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places.

Question 2: Compute the days' sales in receivables at the end of Year 2 and Year 1. Use 365 days and round to one decimal place.

Question 3: What conclusions can be drawn from (1) and (2) regarding Best Buy's efficiency in collecting receivables?

Question 4: What assumption did we make about sales for the Best Buy ratio computations that might distort the ratios and therefore cause the ratios not to be comparable for Year 2 and Year 1?

Reference no: EM132482605

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