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FSA $4$: Ratios: accounts receivable turnover and days sales in receivables

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Ratio: accounts receivable turnover

You will use the NIKE financial statements in appendix C for this ratio.

The formula for accounts receivable turnover is $=$

$$Sales $/$ average accounts receivable

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Nike uses the account name revenues for their sales.

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Average accounts receivable is the sum of the beginning and ending accounts receivable added together and then divided by $2.$ The beginning accounts receivable for $5/31/21$ is the ending accounts receivable from $5/31/20.$ The beginning accounts receivable for $5/31/20$ is $4,272.$ Round the average accounts receivable to the nearest tenth before dividing into the sales. Then round the ratio to the nearest tenth.

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This ratio measures the number of times accounts receivable is turned over during the year. The higher the number, the more efficiently the company is collecting the accounts receivable and managing its accounts receivable well.

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$5/31/21$

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$5/31/20$

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Comment on the accounts receivable turnover

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Ratio: # of days sale in receivables

You will use the NIKE financial statements in appendix C for this ratio. They are also located under the FSA module under the content tab in Cobra.

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The formula for number of days sales in receivables is:

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$$ Average accounts receivable $$

$$ Average daily sales

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Average accounts receivable is the sum of the beginning and ending accounts receivable added together and then divided by $2.$ The beginning accounts receivable for $5/31/21$ is the ending accounts receivable from $5/31/20.$ The beginning accounts receivable for $5/31/20$ is $4,272.$ Round the average accounts receivable to the nearest tenth.

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The average daily sales is equal to sales $($Revenues$)/365.$ Round the average daily sales to the nearest tenth before dividing into the average accounts receivable. Then round the ratio to the nearest tenth

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$5/31/21$ ratio

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$5/31/20$ ratio

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This ratio is an estimate of the number of days the receivables have been outstanding. The ratio is compared to the credit terms to see how well the company is doing with collection. If the terms are net $30,$ you would want this number to be close to $30.$

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Comment on NIKEs accounts receivable collection and management between the two years.

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