Management and Organizational Studies 2285 Lecture Notes - Lecture 6: Accounts Receivable, Logo Records
Document Summary
12/31 interest receivable (b) current ratio dec. 31, 2014 = (,000 x 11% x 6/12) 3. 19 times (or about 114 days) times turnover of 3. 19. Current ratio of 2. 241 in 2014 is much higher than last year at. Accounts receivable is significantly lower than last year"s 4. 75. The current ratio is considerably higher due to the increase in trade receivables (particularly the note receivable), and, for the same reason, the turnover is reduced. The existence of the one-year note from the major customer skews the turnover measurement as this receivable is no longer governed by normal credit terms. If the note receivable is excluded from the turnover ratio, the turnover is 5. 06, indicating that the remainder of the receivables on open account are being collected with a slight improvement over the previous year. Loss on sale of receivables (,000 x 11% x 6/12) = ,750 (,000 + ,750) x 3. 5% = ,846.