The King Mattress Company had the following operating results for 2009-2010.In addition,the company paid dividends in both 2009 and 2010 of $60,000 per year and made capital expenditures in both years of $30,000 per year.The company's stock price in 2009 was $8 and $7 in 2010.The industry average earnings multiple for the mattress industry was 9 in 2010 and the free cash flow and sales multiples were 18 and 1.5,respectively.The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2010.
The accounts receivable turnover ratio for 2010 is:

Question

The King Mattress Company had the following operating results for 2009-2010.In addition,the company paid dividends in both 2009 and 2010 of $60,000 per year and made capital expenditures in both years of $30,000 per year.The company's stock price in 2009 was $8 and $7 in 2010.The industry average earnings multiple for the mattress industry was 9 in 2010 and the free cash flow and sales multiples were 18 and 1.5,respectively.The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2010. 
The accounts receivable turnover ratio for 2010 is:

Quizplus · Accepted Answer

The accounts receivable turnover ratio for 2010 is calculated as follows:

Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable

We are given that the company's net sales for 2010 are $4,750,000. To calculate the average accounts receivable for the year, we take the average of the beginning and ending accounts receivable balances:

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2
                           = ($350,000 + $400,000) / 2
                           = $375,000

Therefore, the accounts receivable turnover ratio for 2010 is:

Accounts Receivable Turnover Ratio = $4,750,000 / $375,000
                                   = 12.7

The correct answer is B.

The King Mattress Company Had the Following Operating Results for 2009-2010.In