Comparative Analysis Problem - 1 Comparative Analysis...

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1Comparative Analysis ProblemMichelle BakerACC/291January 23, 2017Michael Barsch
2Comparative Analysis ProblemThe financial statements of Columbia Sportswear Company are presented in Appendix B.Financial statements of VF Corporation are presented in Appendix C.(a)Accounts receivable turnover ratio:Columbia SportswearVF Corporation2,100,590 / (344,390 + 306,878) / 212,154,784 / (1,276,224 + 1,360,443) / 2= 325,634= 1,318,333.52,100,590 / 325,634 = 6.45 = 6.5 times12,154,784 / 1,318,333.5 = 9.2 times(b) Average collection period:365 / 6.5 = 56.2 days365 / 9.2 = 39.7 daysThe general rule for the average collection period is that it should not greatly exceed the credit term period. VF Corporation’s average collection period (approximately 40 days) is longerthan the normal credit term period of 30 days but it is better than Columbia sportswear’s 56 day average collection period.The receivable turnover ratio is nearly two times higher for VF Corporation than Columbia Sportswear. This means that VF Corporation sells more merchandise on a cash basis and it is more conservative about extending credit to customers. Columbia Sportswear is more likely to sell items on credit, which may increase revenue, but also carries a higher risk of loss. The average collection period estimates the number of days that will pass for a credit sale to be paid in cash. As expected, VF Corporation has a lower turnover ratio, which means their receivables will take less time to be paid on averaged compared to Columbia Sportswear.Receivables are frequently classified as accounts, notes, and other. Accounts receivable are amounts customers owe on account. Notes receivable represent claims that are evidenced by formal instruments of credit. Other receivables include nontrade receivables such as interest
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