Tecom Had Net Sales of $315,000 and Average Accounts Receivable

question 34

Essay

Tecom had net sales of $315,000 and average accounts receivable of $75,600. Its competitor, ZCom, had net sales of $299,000 and average accounts receivables of $81,350. Calculate the accounts receivable turnover for both companies. Which company is doing a better job of managing its accounts receivables?

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Definitions:

Mark-Up

The percentage added to the cost of goods to determine the selling price, covering overhead and profit.

Agreed Transfer Price

The price at which goods or services are transferred between departments within a company or between affiliated companies.

Gross Margin

The difference between sales revenue and the cost of goods sold, expressed as a percentage of sales revenue, indicating the financial health of a company's core activities.

Transfer Price

The price at which goods and services are sold between divisions within the same company.