Accounts receivable turnover and days' sales in receivables
The Limited Brands Inc.sells women's clothing and personal health care products through specialty retail stores including Victoria's Secret and Bath & Body Works stores. The
Limited Brands reported the following (in millions) for two recent years:
|
year2
|
year1
|
|
Sales
|
$10,364
|
$9,613
|
|
Accounts receivable
|
269
|
267
|
Assume that accounts receivable (in millions) were $249 at the beginning of Year 1.
a. Compute the accounts receivable turnover for Year 2 and Year 1. Round to one decimal place.
b. Compute the day's sales in receivables for Year 2 and Year 1. Use 365 days and round to one decimal place.
c. What conclusions can be drawn from these analyses regarding The Limited Brands' efficiency in collecting receivables?