The following data are taken from the financial statements of Rise and Shine Company. Terms of all sales are 2/10, n/30.

Year 3	Year 2	Year 1
Accounts receivable, end of year	$ 450,000	 	$ 375,000	 	$300,000
Sales	2,640,000	 	1,957,500
a.  For Years 2 and 3, determine (1) the accounts receivable turnover and (2) the days' sales in receivables. Assume there are 365 days in the year. Round intermediate calculations to the nearest whole dollar and final answers to one decimal place.

Year 3	 	Year 2
1. Accounts receivable turnover	fill in the blank 1
fill in the blank 2

2. Number of days' sales in receivables	fill in the blank 3
57
days	fill in the blank 4
62.9
days

To determine the accounts receivable turnover and the days' sales in receivables for Years 2 and 3 for Rise and Shine Company, we can follow these steps:

### 1. Accounts Receivable Turnover

The accounts receivable turnover is calculated using the formula:

\[ \text{Accounts Receivable Turnover} = \frac{\text{Net Sales}}{\text{Average Accounts Receivable}} \]

Where:
- $\text{Net Sales}$ is the sales for the year.
- $\text{Average Accounts Receivable}$ is the average of the accounts receivable at the beginning and end of the year.

#### For Year 3:
\[ \text{Average Accounts Receivable} = \frac{\text{Accounts Receivable at the End of Year 2} + \text{Accounts Receivable at the End of Year 3}}{2} \]
\[ = \frac{375,000 + 450,000}{2} \]
\[ = 412,500 \]

\[ \text{Accounts Receivable Turnover} = \frac{2,640,000}{412,500} \]
\[ = 6.4 \]

#### For Year 2:
\[ \text{Average Accounts Receivable} = \frac{\text{Accounts Receivable at the End of Year 1} + \text{Accounts Receivable at the End of Year 2}}{2} \]
\[ = \frac{300,000 + 375,000}{2} \]
\[ = 337,500 \]

\[ \text{Accounts Receivable Turnover} = \frac{1,957,500}{337,500} \]
\[ = 5.8 \]

### 2. Days' Sales in Receivables

The days' sales in receivables is calculated using the formula:

\[ \text{Days' Sales in Receivables} = \frac{365}{\text{Accounts Receivable Turnover}} \]

#### For Year 3:
\[ \text{Days' Sales in Receivables} = \frac{365}{6.4} \]
\[ \approx 57 \text{ days} \]

#### For Year 2:
\[ \text{Days' Sales in Receivables} = \frac{365}{5.8} \]
\[ \approx 62.9 \text{ days} \]

### Summary of Results

#### Year 3
1. Accounts Receivable Turnover: 6.4
2. Days' Sales in Receivables: 57 days

#### Year 2
1. Accounts Receivable Turnover: 5.8
2. Days' Sales in Receivables: 62.9 days

### Questions for Further Understanding:
1. How do changes in accounts receivable turnover impact cash flow?
2. What strategies can be used to improve accounts receivable turnover?
3. Why is it important to monitor days' sales in receivables?
4. How might changes in credit policy affect accounts receivable turnover?
5. What could cause a significant increase or decrease in accounts receivable turnover?
6. How does accounts receivable turnover compare across different industries?
7. What role does accounts receivable management play in overall financial health?
8. How can technology assist in managing accounts receivable?

### Tip:
Regularly monitoring your accounts receivable turnover ratio can help identify potential issues in your credit policy and collection processes, ensuring better cash flow management.

Learn how to calculate accounts receivable turnover and days' sales in receivables for Rise and Shine Company using financial data from their statements. Understand the formulas and methodology for determining financial ratios. Suitable for advanced college-level students and professionals.

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