Analyze Ralph Lauren
Ralph Lauren Corporation (RL) designs, markets, and distributes a variety of apparel, home décor, accessory, and fragrance products. The company's products include such brands as Ralph Lauren, Polo by Ralph
Lauren, and Chaps. For two recent years, the company reported the following (in millions):
Year 2
Year 1
Sales
86,313.0
56,182.3
Accounts receivable (end of year)
398.1
421.4
The accounts receivable at the beginning of Year 1 was $450.2 million.
a. Compute the accounts receivable turnover for Year 1 and Year 2.
For interim computations, carry amounts out to one decimal place. Round your final answers to one decimal place.
Year 2
Year 1
Accounts Receivable Turnover
15.4 ?
14.2 ?
b. Compute the days' sales in receivables for Year 1 and Year 2. Assume 365 days in a year. For interim computations, carry amounts out to one decimal place. Round your final answers to one decimal place.
Year 2
Year 1
Days' Sales in Receivables
23.7 ? days
25.7 x days
c. The accounts receivable turnover has increased ? between the two years. In addition, the days' sales in receivables decreased ?. There appears to be an increase ? in the efficiency in collecting
accounts receivable between the two years.
The accounts receivable turnover is a ratio of sales to average accounts receivable. The number of days' sales in receivables is a ratio of average accounts receivable to average daily sales. Consider the
components of the ratios. Consider whether changes reflect efficiency