accounts receivable turnover for general mills ? can some help out with this assgiment please?
the following amounts (in millions of dollars`
net sales, for the year ended May 30,2004 $11,070
receivables, less allowance for doubtful accounts of $19, May 30,2004 1,010
receivable, less allowance for doubtful accounts of $28, May 25,2003 980
1. compute general mills' accounts receivable turnover ratio for 2004. (assume that all sales are on credit.)
2.what is the average collection period, in days, for account receivable? explain your answer.
3.give some examples of the types of customer you would expect general mills to have. do you think the average collections period for sales to these customers is reasonable?what other information do you need to fully answer this question?
- Anonymous1 decade agoFavorite Answer
1. a/r turnover ratio is:
net sales/average accounts receivable
11070/((1010+980)/2) = 11070/995 = 11.13 times
2. average collection time is 365/ acct. rec. turnover (calculated in 1)
so 365/11.13 = 33 days
3. given that General Mills deals in food, receivable turnover is frequent. you can go to General Mills' public filings (10-K, 10-Q)
from GIS latest 10-K:
"Our primary customers are grocery stores, mass merchandisers, membership stores, natural food chains, drug, dollar and discount chains, commercial and noncommercial foodservice distributors and operators, and convenience stores. We generally sell to these customers for resale to consumers through our direct sales force. We use broker and distribution arrangements for certain products or to serve certain types of customers. We also use these types of arrangements in less developed markets internationally.
During fiscal 2007, Wal-Mart Stores, Inc. and its affiliates (Wal-Mart), accounted for 20 percent of our consolidated net sales and 27 percent of our net sales in the U.S. Retail segment. No other customer accounted for 10 percent or more of our consolidated net sales. Wal-Mart also represented 5 percent of our net sales in the International segment and 6 percent of our net sales in the Bakeries and Foodservice segment. As of May 27, 2007, Wal-Mart accounted for 20 percent of our receivables invoiced in the U.S. Retail segment, 3 percent of our receivables invoiced in the International segment and 3 percent of our receivables invoiced in the Bakeries and Foodservice segment. There has been significant worldwide consolidation in the food retailing industry in recent years, and we believe that this trend is likely to continue. The 5 largest customers in our U.S. Retail segment accounted for 54 percent of its fiscal 2007 net sales, the 5 largest customers in our International segment accounted for 41 percent of its fiscal 2007 net sales, and the 5 largest customers in our Bakeries and Foodservice segment accounted for 40 percent of its fiscal 2007 net sales. Although the loss of any large customer for an extended length of time could negatively impact our sales and profits, we do not anticipate that this will occur to a significant extent due to the consumer demand for our products and our relationships with our customers. For further information on our customer credit and product return practices please refer to Note 2 to the Consolidated Financial Statements on pages 43 through 47 in Item 8 of this report."