E13-9 Computing the Accounts Receivable and Inventory Turnover Ratios

Proctor & Gamble is a multinational corporation that manufactures and markets many products that you use every day. In 2010, sales for the company were $78,983 (all amounts in millions). The annual report did not report the amount of credit sales, so we will assume that all the sales were on credit. The average gross profit percentage was 52.0 %. Account balances follow:

	Beginning	Ending
Account Receivable (net)	$5,836	$5,335
Inventory	$6,880	$6,384

Required:

1. Rounded to one decimal place, compute the turnover ratios for accounts receivable and inventory.

2. By dividing 365 by your ratios from requirement 1, calculate the average days to collect receivables and the average days to sell inventory.

3. Interpret what these ratios and measures mean for P&G.