costco wholesale corporation operates membership warehouses that sell a variety of b 546080

CP 8-5 Accounts receivable turnover and days’ sales in receivables

Costco Wholesale Corporation operates membership warehouses that sell a variety of branded and private label products. Headquartered in Issaquah, Washington, it also sells merchandise online in the United States (Costco.com) and in Canada (Costco.ca). For two recent years, Costco reported the following (in millions):

Assume that the accounts receivable (in thousands) were $1,009 at the beginning of Year 1.

1. Compute the accounts receivable turnover for Year 2 and Year 1. Round to one decimal place.

2. Compute the days’ sales in receivables at the end of Year 2 and Year 1. Round to one decimal place.

3. What conclusions can be drawn from (1) and (2) regarding Costco’s efficiency in collecting receivables?

4. Given the nature of Costco’s operations, do you believe Costco’s accounts receivable turnover ratio would be higher or lower than a typical manufacturing company, such as H.J. Heinz Company? Explain.