Question
(Activity ratios) The following financial information is for Ambroise Industries Inc.: 2020 2019 Sales $5,000,000 $4,500,000 Cost of goods sold 2,250,000 2,025,000 Accounts receivable 585,500
(Activity ratios) The following financial information is for Ambroise Industries Inc.:
2020 | 2019 | |||
Sales | $5,000,000 | $4,500,000 | ||
Cost of goods sold | 2,250,000 | 2,025,000 | ||
Accounts receivable | 585,500 | 558,800 | ||
Inventory | 770,800 | 707,400 | ||
Accounts payable | 200,750 | 195,250 | ||
Total assets | 1,875,200 | 1,690,500 |
Ambroise is a distributor of auto parts operating in eastern Ontario that offers 30-day terms and has all sales on credit. The company has a large inventory due to the number of parts it stocks for different makes and models of cars. Most of its suppliers offer terms of 30 days, and Ambroise tries to stay on good terms with its suppliers by paying on time.
Q:How does average time taken by Ambroise to collect its accounts receivable compare with the credit terms that the company offers?
Average collection period | 41.8 days |
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