Assuming a 365 day year,Gore Industries calculated an average of 53 days to collect its accounts receivable in 2015.During 2015,Gore's accounts receivable turnover rate:
A)Was approximately 6.89.
B)Was equal to 53 times its average accounts receivable.
C)Was approximately 0.15.
D)Can't be determined from this information alone.

Question

Quizplus · Accepted Answer

The accounts receivable turnover rate is calculated as the number of times a company collects its average accounts receivable in a year. Therefore, the formula is: Accounts Receivable Turnover Rate = Sales / Average Accounts Receivable. We know that the average collection period was 53 days, which means that the average accounts receivable was outstanding for 53/365 of a year. Therefore, the accounts receivable turnover rate can be calculated as: Accounts Receivable Turnover Rate = 365 / 53 = 6.89 (approx). Therefore, the answer is (A).

Assuming a 365 Day Year,Gore Industries Calculated an Average of 53