Question

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 the years ending February 26, 2005, and February 28, 2004, Best Buy reported the following (in millions):


Assume that the accounts receivable (in millions) were $312 at the beginning of the year ending February 28, 2004.
1. Compute the accounts receivable turnover for 2005 and 2004. Round to one decimal place.
2. Compute the days’ sales in receivables at the end of 2005 and 2004.
3. What conclusions can be drawn from (1) and (2) regarding Best Buy’s efficiency in collecting receivables?
4. For its years ending in 2005 and 2004, Circuit City has an accounts receivable turnover of 61.0 and 56.3, respectively. Compare Best Buy’s efficiency in collecting receivables with that of Circuit City.
5. What assumption did we make about sales for the Circuit City and Best Buy ratio computations that might distort the two company ratios and therefore cause the ratios not to becomparable?


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  • CreatedMay 29, 2012
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