Compute and compare the accounts receivable turnover ratios for Coca-Cola and Wal-Mart. Indicate all numbers you used to calculate the ratio.
What constitutes a “reasonable” accounts receivable turnover ratio? What characteristic(s) of these companies would indicate that these ratios are reasonable?
(Back up your answers with facts and cite website and text references used.)
An article recently appeared in the Wall Street Journal indicating that companies are selling their receivables at a record rate. Why might Coca-Cola and Wal-Mart sell their receivables?
In my opinion the comparison of the two companies are been explained below:
The accounts receivable turnover ratio for the coca cola company. Receivable turnover ratio successively enhanced to 9.63, above organization normal. Normal receivable accumulation period, for the Coca Cola Co in June 30. 2015 quarter, has diminished to 38 days, contrast with 39 days, in the March 31, 2015 quarter. Inside of Consumer Non Cyclical area 2 different organizations have accomplished higher receivables turnover proportion. While receivables turnover proportion aggregate positioning has improved so far to 32, from general positioning in past quarter at 151. In my thought I could get a overall detail that the coca cola is been litter in their presence as compared to the last year (Friedlob, G. T 2003).
While the scene from the wall mart industry, it could be able to noted that Receivable turnover proportion consecutively enhanced to 78.22, underneath organization normal. Normal accumulation period, for Wall-mart Stores’ accouts receivable stayed unaltered at 5 days, in the April 30, 2015 quarter.
Inside of Retail segment 6 different organizations have accomplished higher receivables turnover proportion. While receivables turnover proportion aggregate positioning has improved so far to 12, from general positioning in past quarter at 14.
The coca cola got their sustainable growth because they improve from the below average level than for their prospects, and the wall mart has been improved from their above average level. Form these it could be understand that the coca cola company is increasing their ratios from the above average level. That means already they are in an increasing level so from that they are been increasing. Through the comparison of the both companies they are in a reasonable increasing way. Because both the company does not get into a decreasing level.
Both the companies does not need to sell in a reasonable rate, these is because as compared to the other competitors their cash flow is high and thus not need to sell in a reasonable rate as compared to other competitors.
Friedlob, G. T., & Schleifer, L. L. (2003). Essentials of financial analysis (Vol. 23). John Wiley & Sons.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Financial & Managerial Accounting. John Wiley & Sons.
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