Calculate the receivables turnover and collection period. (Remember that this is the end of the first year of business.) (Round answers to 1 decimal place, e.g. 52.7. Use 365 days for calculation.)

Receivables turnover

times

Collection period

days

### 1. **Receivables Turnover**

The Receivables Turnover ratio measures how efficiently a company collects its receivables. It is calculated as:

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

Since this is the first year of business, the **Average Accounts Receivable** will simply be the year-end balance.

- **Net Credit Sales** = Sales - Sales Returns and Allowances
  \[
  \text{Net Credit Sales} = \$3,490,500 - \$78,000 = \$3,412,500
  \]
  
- **Average Accounts Receivable** = Year-end Accounts Receivable
  \[
  \text{Average Accounts Receivable} = \$546,000
  \]

Now, we can calculate the Receivables Turnover:

\[
\text{Receivables Turnover} = \frac{\$3,412,500}{\$546,000} \approx 6.3 \text{ times}
\]

### 2. **Collection Period**

The Collection Period represents the average number of days it takes to collect receivables. It is calculated as:

\[
\text{Collection Period} = \frac{365 \text{ days}}{\text{Receivables Turn

Learn how to calculate the receivables turnover and collection period at the end of the first year of business. Includes step-by-step calculations with specific data points like net credit sales and average accounts receivable. Round answers to 1 decimal place. Useful for financial analysts and business professionals.

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