Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

Exercise 6

Accounts receivable turnover
The accounts receivable turnover ratio will vary across companies, depending on the nature of the company's operations. For example, an accounts receivable turnover of 6 for a retailer is unacceptable but might be excellent for a manufacturer of specialty milling equipment. A list of well-known companies follows:

1. Categorize each of the preceding companies as to whether its turnover ratio is likely to be above or below 15.
2. Based on (1), identify a characteristic of companies with accounts receivable turnover ratios above 15.