Costco Wholesale Corporation operates membership warehouses that sell a variety of branded and private label products. Headquartered in Issaquah, Washington, it also sells merchandise online in the United States (Costco.com) and in Canada (Costco.ca). For two recent years, Costco reported the following (in millions):
_______________________________ Year 2 ________ Year 1
Sales ..................................... $116,199 .......... $112,640
Accounts receivable at end of year ... 1,972 ................. 1,817
Assume that the accounts receivable (in thousands) were $1,822 at the beginning of Year 1.
1. Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places.
2. Compute the days' sales in receivables at the end of Year 2 and Year 1. Use 365 days and round to one decimal place.
3. What conclusions can be drawn from (1) and (2) regarding Costco's efficiency in collecting receivables?
4. Given the nature of Costco's operations, do you believe Costco's accounts receivable turnover ratio would be higher or lower than a typical manufacturing company such as the Campbell Soup Company? Explain.