The following information is from the annual financial statements of Raheem Company.

 	Year 3	Year 2	Year 1
Net sales	$ 273,000	$ 204,000	$ 264,000
Accounts receivable, net (year-end)	25,400	23,200	19,900
(1) Compute its accounts receivable turnover for Year 2 and Year 3.
(2) Assuming its competitor has a turnover of 16.9, is Raheem performing better or worse at collecting receivables than its competitor?


To compute the accounts receivable turnover for Raheem Company, we use the formula:

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

### Step 1: Calculate Average Accounts Receivable

**For Year 2:**
- Accounts Receivable (Year 1) = $19,900
- Accounts Receivable (Year 2) = $23,200

\[
\text{Average Accounts Receivable (Year 2)} = \frac{19,900 + 23,200}{2} = \frac{43,100}{2} = 21,550
\]

**For Year 3:**
- Accounts Receivable (Year 2) = $23,200
- Accounts Receivable (Year 3) = $25,400

\[
\text{Average Accounts Receivable (Year 3)} = \frac{23,200 + 25,400}{2} = \frac{48,600}{2} = 24,300
\]

### Step 2: Compute Accounts Receivable Turnover

**For Year 2:**
\[
\text{Accounts Receivable Turnover (Year 2)} = \frac{204,000}{21,550} \approx 9.47
\]

**For Year 3:**
\[
\text{Accounts Receivable Turnover (Year 3)} = \frac{273,000}{24,300} \approx 11.25
\]

### Summary of Results
1. **Accounts Receivable Turnover:**
   - Year 2: **9.47**
   - Year 3: **11.25**

### Comparison with Competitor
The competitor has an accounts receivable turnover of **16.9**.

### Performance Evaluation
Raheem's turnover of **11.25** for Year 3 is lower than the competitor's **16.9**, indicating that Raheem is performing worse at collecting receivables compared to its competitor.

Would you like further details or have any questions? Here are some related questions you might consider:

1. How does the accounts receivable turnover ratio impact cash flow?
2. What strategies can Raheem Company implement to improve its accounts receivable turnover?
3. How can the change in turnover from Year 2 to Year 3 be interpreted?
4. What factors might contribute to differences in accounts receivable turnover among competitors?
5. How is accounts receivable turnover related to overall financial health? 

**Tip:** Regularly monitor accounts receivable turnover to identify trends in collection efficiency.

The following information is from the annual financial statements of Raheem Company. Compute its accounts receivable turnover for Year 2 and Year 3. Assuming its competitor has a turnover of 16.9, is Raheem performing better or worse at collecting receivables than its competitor?

Discover how to compute the accounts receivable turnover for Raheem Company for Year 2 and Year 3, with results showing 9.47 and 11.25 respectively. Learn how Raheem's performance compares to a competitor's turnover of 16.9.

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