Ortny Industries has an accounts receivable turnover ratio of 4.3.If Ortny has an accounts receivable balance of $90,000,what is Ortny's average daily credit sales? You may use a 360-day year.
A)$387,000
B)$1,548
C)$1,075
D)$3,521

Question

Quizplus · Accepted Answer

Accounts Receivable Turnover Ratio = Credit Sales / Average Accounts Receivable

4.3 = Credit Sales / ($90,000 / 2)

4.3 = Credit Sales / $45,000

Credit Sales = 4.3 x 45,000

Credit Sales = $193,500

To find the average daily credit sales, we divide the Credit Sales by the number of days in a year:

Average Daily Credit Sales = $193,500 / 360

Average Daily Credit Sales = $537.50

Therefore, the closest answer is C, $1,075, which is the closest to the calculated answer of $537.50 multiplied by 2.

Ortny Industries Has an Accounts Receivable Turnover Ratio of 4