CP 9-3 Accounts receivable turnover and days’ sales in receivables
Best Buy is a specialty retailer of consumer electronics, including personal computers, entertainment software, and appliances. Best Buy operates retail stores in addition to the Best Buy, Media Play, On Cue, and Magnolia Hi-Fi Web sites. For two recent years, Best Buy reported the following (in millions):
| Year Ending | ||
| Feb. 28, 2009 | Mar. 1, 2008 | |
| Net sales | $45,015 | $40,023 |
| Accounts receivable at end of year | 1,868 | 549 |
Assume that the accounts receivable (in millions) were $548 at the beginning of fiscal year 2008.
1. Compute the accounts receivable turnover for 2009 and 2008. Round to one decimal place.
2. Compute the days’ sales in receivables at the end of 2009 and 2008. Round to one decimal place.
3. What conclusions can be drawn from (1) and (2) regarding Best Buy’s efficiency in collecting receivables?
4. What assumption did we make about sales for the Best Buy ratio computations that might distort the ratios and therefore cause the ratios not to be comparable for 2009 and 2008?
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