The Grand retail firm reported the following financial data for the past several years:
Year
|
(Amounts in 000s)
|
5
|
4
|
3
|
2
|
1
|
|
Sales
|
$1,254,131
|
$1,210,918
|
$1,096,152
|
$979,458
|
$920,797
|
|
Net accounts receivable
|
419,731
|
368,267
|
312,776
|
72,450
|
230,427
|
The Grand retail firm had a decentralized credit operation allowing each store to administer its credit operation. Many stores provided installment plans allowing the customer up to 36 months to pay. Gross profits on installment sales were reflected in the financial statements in the period when the sales were made.
Required:
a. Using Year 1 as the base, prepare horizontal common-size analysis for sales and net accounts receivable.
b. Compute the accounts receivable turnover for Years 2-5. (Use net accounts receivable.)
c. Would financial control of accounts receivable be more important with installment sales than with sales on 30-day credit? Comment.
d. Comment on what is apparently happening at The Grand retail firm.