The following are summary financial data of the three most recent years for two companies:
a. Using the data above, compute the accounts receivable turnover and average collection period for each company for 2013 and 2012. (Round to two decimal places)
b. Which company appears to have a better credit collection policy? Explain why.
Definitions:
Income Statement
A financial document that shows the company's revenue and expenses over a specific period, resulting in net income or loss.
Dollar Amounts
The numerical value that represents a specific monetary figure in terms of dollars.
Component Percentages
A method to express various parts of a financial statement as proportions of a whole to analyze component efficiency and performance.
Quality of Income Ratio
A measure that indicates the amount of earnings that are realized as cash; assessing the ability of a firm to convert its net income into cash.
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