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Suppose the following information was taken from the 2022 financial statements of FedEx Corporation, a major global transportation/delivery company. (in millions) 2022 2021 Accounts receivable (gross) $ 3,587 $ 4,517 Accounts receivable (net) 3,391 4,359 Allowance for doubtful accounts 196 158 Sales revenue 35,497 37,953 Total current assets 7,116 7,244
1. Calculate the accounts receivable turnover and the average collection period for 2014 for FedEx.
2. Is accounts receivable a material component of the company?

Respuesta :

Answer:

(1) (i) 9.16 times

(ii) 39.845 days

(2) Yes

Explanation:

1. Net credit sales = 35,497

Average net receivables = (3,391 + 4,359) ÷ 2

                                          = 3,875

So,

Receivables turnover ratio = Sales revenue (2022) ÷ Average net receivables

                                             = 35,497 ÷ 3,875

                                             = 9.16 times

However I don't know how they got the net receivables figure, because:

Gross receivable - ADA = net receivable,

but it doesn't work out like this above, so since the net receivable is given, I just used it as given.

Average collection period = 365 days ÷ Receivables turnover

                                            = 365 ÷ 9.16

                                            = 39.845 days

2. In order for something to be "material" it must be important.

Accounts Receivable are part of current assets and they are very important, so the answer is yes.

abiolataiwo2015

The  accounts receivable turnover and the average collection period for 2014 for FedEx is: 9.16 times; 40 days.

Account receivable turnover

1. Receivables turnover ratio

Average net receivables = (3,391 + 4,359) ÷ 2

Average net receivables = 3,875

Receivables turnover ratio = Sales revenue (2022) ÷ Average net receivables

Receivables turnover ratio = 35,497 ÷ 3,875

Receivables turnover ratio  = 9.16 times

Average collection period = 365 days ÷ Receivables turnover

Average collection period = 365 ÷ 9.16

Average collection period  = 39.845 days

Average collection period =40 days( Approximately)

2. Yes Accounts Receivable is a material component of the company.

Inconclusion the  accounts receivable turnover and the average collection period for 2014 for FedEx is: 9.16 times; 40 days.

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