Reference no: EM133114285

Question - Analyze and compare Amazon to Best Buy

Amazon, Inc. (AMZN) is one of the largest Internet retailers in the world. Best Buy, Inc. (BBY) is a leading retailer of consumer electronics and media products in the United States. Amazon and Best Buy compete in similar markets; however, Best Buy sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Sales and accounts receivable information for both companies for a recent period follows (in millions):

	Amazon	Best Buy
Sales	$135,987	$39,528
Accounts receivable:
Beginning of year	5,654	1,280
End of year	8,339	1,162

Required -

a. Determine the accounts receivable turnover for each company.

b. Determine the number of days' sales in receivables for each company. Use 365 days and round all calculations to one decimal place.

c. With regard to efficiency in collecting accounts receivable between the two companies which of the following statements is correct?

1. Best Buy is more efficient than Amazon in turning accounts receivable into cash.

2. Amazon is more efficient than Best buy in turning accounts receivable into cash.

3. Both Amazon and Best Buy are equally efficient in turning accounts receivable into cash.

4. Both Amazon and Best Buy are equally inefficient in turning accounts receivable into cash.

d. What might explain the difference in the above ratios?

1. Difference in the type of customers served by the two companies.

2. Difference in the products sold by the two companies.

3. Difference in the purchasing policies of the two companies.

4. Difference in the management of funds.