Description
The purpose of this assignment is to help you understand the basics of financial statement analysis using financial ratios on the assets section of the balance sheet, data interpretation, and how ratios are used to gain insight about the management of receivable.
Assignment Steps
Resources: Financial Accounting: Tools for Business Decision Making
Develop an 875-word analysis providing conclusions concerning the management of accounts receivable based on the financial statements of Columbia Sportswear Company presented in Appendix B and the financial statements of VF Corporation presented in Appendix C, including the following:
- Based on the information contained in these financial statement, compute the following 2014 values for each company:
- Accounts receivable turnover (For VF, use "Net sales" and assume all sales were credit sales)
- Average collection period for accounts receivable
- What conclusions concerning the management of accounts receivable can be drawn from this data?
Use the Week 1 Excel® spreadsheet to show your work and submit with your analysis.
Explanation & Answer
Attached.
Management of Account Receivables
Comparative analysis
Columbia Sportswear Vs. VF corporation
Name
Institution
2
Account receivable turnover ratio
A company needs to collect account receivables in the course of doing its business. The number
of times a business collects it account receivables is known as accounts receivable. The turnover
is normally considered to be of one financial period or one year. It shows the ability of a business
to issue a credit to its customers and collect in time. It is the major determinant of the collection
period efficiency. The ratio is calculated by finding the average of the ending and beginning
account and dividing by the net credit sales for the year (Belbin, 2011). Therefore, a business must
keep proper records of credit sales and cash sales.
The ratio varies with the industry that is why it makes it important to consider the industrial ratio
when evaluating a business efficiency. If the ratio is high for a business, there is an aggressive
collection department, a conservative credit policy, and high-quality customers. A low ratio
signifies an absence of a good credit policy, there is an inadequate collection function, customers
have financial difficulties and the business has huge bad debts.
Keeping track of the rec...
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