Johnson Lawncare Company is deciding whether they need to change their credit policies for new and existing customers. Management feels the company is not as liquid as they should be because of a perceived increase in collection times. To check that perception, they pulled the following information from their past two balance sheets: What are the accounts receivable turnover in each year? Is management justified in believing that collections have become less effective?

Question

Johnson Lawncare Company is deciding whether they need to change their credit policies for new and existing customers. Management feels the company is not as liquid as they should be because of a perceived increase in collection times. To check that perception, they pulled the following information from their past two balance sheets:  What are the accounts receivable turnover in each year? Is management justified in believing that collections have become less effective?

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The Answer of Johnson Lawncare Company is deciding whether they need to change their credit policies for new and existing customers. Management feels the company is not as liquid as they should be because of a perceived increase in collection times. To check that perception, they pulled the following information from their past two balance sheets:  What are the accounts receivable turnover in each year? Is management justified in believing that collections have become less effective?

Johnson Lawncare Company Is Deciding Whether They Need to Change