Question
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.
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 receivables-beginning | 820,000 | 600,000 | ||
Credit card receviables-ending | 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 OR LOWER than Lestrade's. The number of days' sales in receivables is HIGHER OR LOWER for Xavier than for Lestrade. These differences indicate that Xavier is able to turn over its receivables MORE OR LESS quickly than Lestrade. As a result, it takes Xavier MORE OR LESS time to collect its receivables.
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