Shelby Stores Company and Landon Stores, Inc. are large retail department stores
ID: 2497257 • Letter: S
Question
Shelby Stores Company and Landon Stores, Inc. are large retail department stores. Both companies offer credit to their customers through their own credit card operations. Information from the financial statements for both companies for two recent years is as follows (all numbers are in millions):
a. Determine the (1) accounts receivable turnover and (2) the number of days' sales in receivables for both companies. Round answers to one decimal place. Assume 365 days a year.
b. Shelby's accounts receivable turnover is SelecthigherlowerItem 5 than Landon's. The number of days' sales in receivables is SelecthigherlowerItem 6 for Shelby than for Landon. These differences indicate that Shelby is able to turn over its receivables SelectmorelessItem 7 quickly than Landon. As a result, it takes Shelby SelectmorelessItem 8 time to collect its receivables.
Shelby Landon Merchandise sales $244,550 $343,100 Credit card receivables-beginning 52,363 57,784 Credit card receivables-ending 43,715 44,488Explanation / Answer
a) Particulars Shelby Landon Merchandise Sales 244,550.00 343,100.00 Opening Credit Card Receivables 52,363.00 57,784.00 Closing Credit Card Receivables 43,715.00 44,488.00 Average Credit Card Receivables = (Op+Cl)/2 48,039.00 51,136.00 1) Accounts Receivable Turnover = Sales/ Avg Card Receivables 5.09 6.71 2) the number of days' sales in receivables = 365/Accounts receivables turnover 71.70 54.40 b) Sheiby accounts receivable turnover is lower than Landon's The number of days' sales in receivables is higher for Shelby than for Landon These differences indicate that Shelby is able to turn over its receivables less quickly than Landon As a result, it takes Shelby more time to collect its receivables.
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