Presented here is basic financial information (in millions) from the 1998 annual reports of Nike and Reebok:

Instructions

(a) Calculate the receivables turnover ratio and average collection period for both companies. Comment on the difference in their collection experiences.

(b) Calculate the January 1 and December 31 ratio of allowance for doubtful accounts to gross accounts receivable (credit risk ratio) for each company. Comment on any apparent differences in their credit-granting practices.

Transcribed Image Text:

Sales Allowance for doubtful accounts, Jan. 1 Allowance for doubtful accounts, Dec. 31 Accounts receivable balance (gross), Jan. 1 Accounts receivable balance (gross), Dec. 31 Nike Reebok $9,553.1 $3,224.6 57.2 44.0 71.4 47.4 1,811.3 605.7 1,745.8 565.2