Handles Corp.reported credit sales of $6,500,000 and cost of goods sold of $3,400,000 for the year.The Accounts Receivable balances at the beginning and end of the year were $525,000 and $575,000, respectively.The receivables turnover ratio was
A)6.2 times.
B)11.3 times.
C)11.8 times.
D)5.9 times.

Question

Quizplus · Accepted Answer

The receivables turnover ratio is calculated as Credit Sales / Average Accounts Receivable. Here, Credit Sales = $6,500,000, Average Accounts Receivable = ($525,000 + $575,000) / 2 = $550,000. Thus, Receivables Turnover Ratio = $6,500,000 / $550,000 = 11.8 times.