Accounts Receivable Turnover Calculation for Bonita Company

What was the accounts receivable turnover for Bonita Company?

The accounts receivable turnover for Bonita Company is 10.

Understanding Accounts Receivable Turnover

Accounts Receivable Turnover is a financial ratio that measures the number of times a company collects its average accounts receivable balance during a specific period. It helps to assess how efficiently a company manages its credit policies and collects its outstanding debts from customers. To calculate the Accounts Receivable Turnover for Bonita Company, we use the formula: Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable First, we need to calculate the Average Accounts Receivable by finding the average of the beginning and ending accounts receivable balances. In this case: Beginning Accounts Receivable = $170,000 Ending Accounts Receivable = $100,000 Average Accounts Receivable: = ($170,000 + $100,000) / 2 = $135,000 Given: Net Credit Sales = $1,350,000 Therefore, the accounts receivable turnover for Bonita Company is calculated as follows: Accounts Receivable Turnover = $1,350,000 / $135,000 Accounts Receivable Turnover = 10 This means that Bonita Company was able to collect its average accounts receivable balance 10 times during the year. A higher turnover ratio indicates a more efficient collection process, while a lower ratio may suggest potential issues with credit policies or collection efforts. In conclusion, with an accounts receivable turnover of 10, Bonita Company demonstrated a strong ability to collect its outstanding debts in a timely manner. This ratio provides valuable insights into the company's financial health and efficiency in managing its accounts receivable.
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