Kessler, Inc. has accounts receivable of $31,600, total assets of $311,500, cost of goods sold of $208,400, and a capital intensity ratio of 1.08. What is the accounts receivables turnover rate?
A) 8.99
B) 9.13
C) 9.42
D) 9.61
E) 9.72

Question

Quizplus · Accepted Answer

The accounts receivables turnover rate is calculated as the cost of goods sold divided by the accounts receivable. Thus, $208,400 / $31,600 = 6.59. However, the correct calculation should use the formula: Sales / Accounts Receivable. Given the capital intensity ratio (Total Assets / Sales) of 1.08, we find Sales = $311,500 / 1.08 = $288,425.93. Then, $288,425.93 / $31,600 = 9.13.