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12 September, 09:56

Dome Metals has credit sales of $180,000yearly with credit terms of net 60 days, which is also the average collection period. Dome does not offer a discount for early payment, so its customers take the full 60 dys to pay. What is the average receivables balance? Receivables turnover?

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  1. 12 September, 09:59
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    The average receivables balance is $29,589

    The Receivables turnover is 6.08 times

    Explanation:

    Dome Metals has credit sales of $180,000 yearly and the average collection period of 60 days.

    The average collection period = 365 days/Receivables turnover ratio = (365 days x average account receivables) / Credit Sales

    Average account receivables = (The average collection period x Credit Sales) / 365 = (60 x $180,000) / 365 = $29,589

    Receivables turnover ratio = 365/The average collection period = 365/60 = 6.08 times
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