7. The asset side of the 2017 balance sheet for Oracle Corporation is below. The

Question

7. The asset side of the 2017 balance sheet for Oracle Corporation is below. The company reported total revenues of $37,728 million in 2017 and $37,047 million in 2016. Use this information to answer the required ORACLE CORPORATION Consolidated Balance Sheets (excerpts) (in millions) May 31, 2017 May 31, 2016 Current assets Cash and cash equivalents Marketable securities Trade receivables, net of allowances for doubtful accounts of $319 and $327 as of May 31, 2017 and May 31, 2016, Respectively Inventories Prepaid expenses and other current assets Total current assets Non-current assets Property, plant and equipment, net Intangible assets, net Goodwill, net Deferred tax assets Other assets Total non-current assets $21,784 $20,152 44,294 35,973 5,300 5,385 212 2,8372,591 74,515 64,313 300 5,3154,000 7,679 4,943 43,045 34,590 1,143 1,291 3,294 3,043 60,476 47,867 S134,991 $112,180 Total assets Required a. What is the company's gross amount of receivables at the end of 2017 and 2016? b. Compute the common-size amount for gross accounts receivable, for both years. Interpret the year-over-year change in this ratio c. Compute the allowance for doubtful accounts to gross accounts receivable, for both years. Interpret the year over-year change in this ratio d. Based on the ratios you calculated, form an opinion about the quality of the company's accounts receivable

Explanation / Answer

A.The gross amount of receivables at the end of the respective years             2017          2016

Trade Receivables net of Allowances                                                            $5300         $5385

Add back allowance for doubtful debts                                                            $319           $327

Total Gross Receivables                                                                                 $5619         $5712

B.The amount of gross receivables is already calculated for both the years .

From the above it is interpreted that the receivables have decreased from the last year of 2016 compared to 2017 which means that realisation of debtors have been good and prompt over the years and chnages of bad debt are less.

C.Compute the allowance for doubtful debt to gross receivables

                                                                                                                  2017           2016

Allowance for doubtful debts                                                                     $319            $327

Gross Receivable                                                                                       $5619         $5712

% of Allowance for Doubtful debt/Gross Receivable                                  5.70            5.72

From the above it is interpreted that the allowance for doubtful debt have decreased compared to 2016 as in 2017 which means the realisation of the company is good and chnages of provision for doubtful debts to bad debts will decrease which means a incease in the accounts receivable turnover ratio.

D.Based on the two calculation above it is seen that the condition of the company accounts receivable have improved as compared to 2016 and the chances of bad debts have decreased which improves the liquidity of the company .

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