1. Accounts Receivable Analysis
2. 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):
3. XavierLestradeSales$8,500,000$4,585,000Credit card receivables-beginning820,000600,000Credit card receviables-ending880,000710,000
4. a.Determine the (1)accounts receivable turnoverand (2) thenumber of days' sales in receivablesfor both companies. Round your calculations and answers to one decimal place. Assume 365 days a year.
5. XavierLestrade1.Accounts receivable turnover2.Number of days' sales in receivablesdaysdays
6. b.Xavier's accounts receivable turnover is much
7. than Lestrade's. The number of days' sales in receivables is
8. for Xavier than for Lestrade. These differences indicate that Xavier is able to turn over its receivables
9. quickly than Lestrade. As a result, it takes Xavier
10. time to collect its receivables.