EX 8-26 Accounts receivable turnover and days’ sales in receivables
Polo Ralph Lauren Corporation designs, markets, and distributes a variety of apparel, home decor, accessory, and fragrance products. The company’s products include such brands as Polo by Ralph Lauren, Ralph Lauren Purple Label, Ralph Lauren, Polo Jeans Co., and Chaps. Polo Ralph Lauren reported the following (in thousands) for two recent years:
| For the Period Ending | ||
| Year 2 | Year 1 | |
| Net sales | $5,660,300 | $4,978,900 |
| Accounts receivable | 592,700 | 486,200 |
Assume that accounts receivable (in millions) were $576,700 at the beginning of Year 1.
a. Compute the accounts receivable turnover for Year 2 and Year 1. Round to one decimal place.
b. Compute the days’ sales in receivables for Year 2 and Year 1. Round to one decimal place.
c. What conclusions can be drawn from these analyses regarding Ralph Lauren’s efficiency in collecting receivables?
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