Computations
Balance Sheet
This calculation is a measure of the Accounts Receivable Turnover, which represents the average length of time a dealership must wait after making a sale before receiving cash. The computation for this ratio is to find the Average Total Dollar Sales per day and divide the Total Receivables by the Sales Per Day to find the number of Days Sales, which are tied up in Receivables.
For this example, we will assume 180 days (January thru June statement, using 30 days per month) for the basis of calculating the average number of days.
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Calculate the Average Total Sales Dollar Per Day: |
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Total Sales |
$9,000,000 |
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Divided by: |
/ |
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Number of Days (Jan-Jun represents 180 days) |
180 |
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Equals the Average Total Sales Dollar Per Day |
$50,000 |
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Calculate the Number of Days Sales: |
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Total Receivables |
$800,000 |
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Divided by: |
/ |
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Average Total Sales Dollar Per Day |
$50,000 |
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Number of Days Sales |
16 days |