# Unit 2 Discussion

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1. Coca-Cola - Accounts receivable turnover ratio Net Revenue (2020) - \$33,014 Accounts receivable 2019 - 3,971 Accounts receivable 2020 - 3,144 Average nets account receivables - \$3144 + \$3971 = \$7115/2 = \$3,557.50 Receivables turnover ratio - \$33,014/\$3557.50 = 9.28 2. Wal-Mart- Accounts receivable turnover ratio Net Revenue (2021) - \$555,233 Accounts receivable 2020 - 6,284 Accounts receivable 2021 - 6,515 Average nets account receivables - \$6515 + \$6284 = \$12799/2 = \$6399.50 Receivables turnover ratio - \$555,233/\$6399.50 = 86.76 3. What constitutes a "reasonable" accounts receivable turnover ratio? Accounts receivable turnover ratio refers to the efficiency a company collect on its receivables. You would need to look at the industry standard to determine a "reasonable" AR ratio. Without that knowledge a ratio would loos its analytical meaning. 4. What characteristic(s) of these companies would indicate that these ratios are reasonable? When looking at our examples, Walmart's AR ratio of 86.76 tells us that it collects its debts quicker than Coca-Cola. This is in part that Walmart is a retailer while Coca-Cola is a whole seller. Since they are in different industries, Coca-Cola's AR ratio may be an industry leader but when compared to a company of another industry it is dwarfed in comparison. 5. Why might Coca-Cola and Walmart sell their receivables? Selling their receivable would accelerate cash flow and increase credit worthiness. This allows for multiple options of paying off debt or purchasing new equipment or material goods.