Global Decision C1 A1 BTN 7-9 Key information from Samsung (Samsung.com), which

Question

Global Decision C1 A1 BTN 7-9 Key information from Samsung (Samsung.com), which is a leading manufacturer of consumer Samsung electronic products, follows. APPLE GOOGLE Current Year One Year Prior Two Years Prior W in millions Accounts receivable, netW 25,168,026 W 24,694,610 W 24,988,532 Sales 200,653,482 206,205,987 228,692,667 Samsung refers to this as "Trade receivables, net" in its footnotes. 1. Compute its accounts receivable turnover for the current year. 2. How long does it take on average for Samsung to collect receivables? 3. Refer to BTN 7-2. How does Samsung compare to Apple and Google in terms of its accounts receivable turnover and its collection period?

Explanation / Answer

1. Account Recievable Turnover = Sales / Average Account Receivable

$200,653,482 / [($25,168,026 + $24,694,610)/2] = 8.048 or 8.05 times

2. Average Collection Period = 365 / Account Receivable Turnover

365 / 8.05 = 45.34 days

3. Comparison with Apple and Google

Account Receivable Turnover

Apple = $233,715 / [($16,849 + $17,460)/2] =13.62 times

Google = $74,989 / [($11,556 + $9,383)] = 7.16 times

Average Collection Period

Apple = 365 / 13.62 = 26.80 days

Google = 365 / 7.16 = 50.98 days

Samsung's account receivable turnover and average collection period are better than Google as it will take lesser time recover its debts but worse in comparison of Apple as Apple's account receivable turnover is much higher and average time taken to recover its debt is much lesser than Samsung.

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