Accounts Receivable Analysis

Xavier Stores Company and Lestrade Stores Inc. are large retail department stores. Both companies offer credit to their customers through their own credit card operations. Information from the financial statements for both companies for two recent years is as follows (in millions):

Xavier Lestrade Sales $8,500,000 $4,585,000 Credit card receivablesbeginning 820,000 600,000 Credit card receviablesending 880,000 710,000

a. Determine the (1) accounts receivable turnover and (2) the number of days' sales in receivables for both companies. Round your calculations and answers to one decimal place. Assume 365 days a year.

Xavier Lestrade 1. Accounts receivable turnover 2. Number of days' sales in receivables days days

b. Xavier's accounts receivable turnover is much higher than Lestrade's. The number of days' sales in receivables is lower for Xavier than for Lestrade. These differences indicate that Xavier is able to turn over its receivables more quickly than Lestrade. As a result, it takes Xavier less time to collect its receivables.