(Managing accounts receivable, LO 5) A financial analyst is comparing the credit management of two companies, Zealand Inc. (Zealand) and Manotick Ltd.

(Manotick). The two companies are in the same industry, but operate in different parts of the country. Through conversations with representatives of each of the companies, the analysts learned that Zealand gives its customers 45 days to pay for purchases, while Manotick gives its customers 60 days to pay. By examining the companies’ financial statements, the analyst found that.during 2004 Zealand had revenues of $2,475,000, of which 82% were on credit, while Manotick had revenues of

$2,950,000, of which 74% were on credit. Average accounts receivable during 2004 were $286,000 for Zealand and $490,000 for Manotick.

Required:

a. Calculate the accounts receivable turnover ratio for Zealand and Manotick.

b. Calculate the average collection period of accounts receivable for Zealand and Manotick.

c. Which company does a better job managing its receivables? Explain.