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Dome Metals has credit sales of $180,000yearly with credit terms of net 60 days, which is also the average collection period. Dome does not offer a discount for early payment, so its customers take the full 60 dys to pay. What is the average receivables balance? Receivables turnover?

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Answer:

The average receivables balance is $29,589

The Receivables turnover is 6.08 times

Explanation:

Dome Metals has credit sales of $180,000 yearly and the average collection period of 60 days.

The average collection period = 365 days/Receivables turnover ratio = (365 days x average account receivables)/Credit Sales

Average account receivables = (The average collection period x Credit Sales)/365 = (60 x $180,000)/365 = $29,589

Receivables turnover ratio= 365/The average collection period = 365/60 = 6.08 times

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