Question

You are a financial analyst and you've been asked by your manager to compare the credit management of two companies, Truax Inc. (Truax) and Ilderton Ltd. (Ilderton). The two are in the same industry, but operate in different parts of the country. They don't compete because their services can only be provided in their local markets. Through conversations with representatives of each of the companies, the analyst learned that Truax gives its customers 45 days to pay invoices whereas Ilderton gives 30 days. You obtained the following information about each company. All sales are on credit:


Required:
a. Calculate the accounts receivable turnover ratio for Truax and Ilderton for 2015–2018.
b. Calculate the average collection period of accounts receivable for Truax and Ilderton for 2015–2018.
c. Prepare a report that discusses how well each company’s management is managingreceivables.


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  • CreatedFebruary 26, 2015
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