Running Head: MANAGEMENT OF ACCOUNTS RECEIVABLE
Management of Accounts Receivable
MANAGEMENT OF ACCOUNTS RECEIVABLE
In essence, the receivable turnover ratio can be calculated to determine how effective a
company utilizes its assets in its operations. For instance, to establish whether companies such as
VP Corporation and the Colombia Sportswear Company utilizes their assets properly the
accounts receivable turnover ratio is calculated by using data from the financial statements.
Furthermore, calculating the receivable turnover ratio enables one to determine whether the
accounts are managed effectively. Thus, the receivable ratio is seen as an activity ratio that
measures the effectiveness of a company in managing the accounts receivables as well as
utilizing assets. This paper attempts to compare the receivable turnover ratio for two companies
namely, VP Corporation and Colombia Sportswear Company. It will evaluate the management of
accounts receivables in each company based on the calculated turnover ratio. Also, the paper will
determine the average collection period for accounts receivable in each company.
The receivable turnover ratio is calculated by taking the net value of credit sales in a
company within a given period and dividing it by the average accounts receivable in the s...
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