Question

Oungre Inc. is a small printing business that provides a wide range of printing services to retail and commercial clients. Retail customers pay cash, while Oungre offers its commercial customers 30 days from the delivery date to pay amounts owing. You have been provided with the following information from Oungre’s accounting records (Oungre’s year-end is December 31):


Required:
a. Calculate Oungre's accounts receivable turnover ratio and average collection period of accounts receivable for 2016, 2017, and 2018.
b. Assess how well Oungre managed its accounts receivable over the three-year period.
c. What are some possible explanations for why Oungre's collection isn't less than 30 days? What steps might Oungre's management take to reduce the collection period?
d. Suppose you didn't know what the proportion of Oungre's sales to commercial customers was. How would your calculation of the accounts receivable turnover ratio and the average collection period of accounts receivable be affected? How would your interpretation of the performance of Oungre's management be affected?


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  • CreatedFebruary 26, 2015
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