Accounts Receivable Turnover Ratio : Meaning

Compute and Understand the Accounts Receivable Turnover Ratio Slides

Accounts Receivable Turnover Ratio : Meaning. It can be expressed in many forms including accounts receivable. A good accounts receivable turnover ratio varies.

Compute and Understand the Accounts Receivable Turnover Ratio Slides
Compute and Understand the Accounts Receivable Turnover Ratio Slides

Accounts receivables turnover ratio is also known as debtors turnover ratio. Accounts receivable ratio measures the efficiency of the company in controlling its account receivable in terms of collecting activities—number of collections. The receivables turnover measurement clarifies the rate at which accounts receivable are being. We calculate it by dividing total net sales by average accounts receivable. The accounts receivable turnover ratio (or receivables turnover ratio) is an important financial ratio that indicates a company's ability to collect its accounts receivable. It tells you the number of times during a given period (e.g., a month, quarter, or year) the company collected its average accounts receivable. A high accounts receivable turnover ratio indicates that your business is more efficient at collecting from your customers. Definition of accounts receivable turnover ratio. The higher the turnover, the faster the business is collecting its receivables. Collecting accounts receivable is critical for a company to pay its obligations when they are due.

Here’s an example of an a/r turnover ratio calculation: It tells you the number of times during a given period (e.g., a month, quarter, or year) the company collected its average accounts receivable. Accounts receivable turnover ratio = net of credit sale / average of account receivable; It can be expressed in many forms including accounts receivable. What is “accounts receivable turnover ratio”? It is calculated by dividing the annual net sales revenue by the average account receivables. It indicates that customers are defaulting and the company needs to optimize collection processes. This is also referred to as the efficiency ratio that measures the company's ability to collect revenue. Accounts receivable turnover ratio = net credit sales / average accounts receivable * average accounts receivables = (beginning accounts receivables + ending accounts receivables) / 2 this formula converted to a percentage shows the average amount of receivables that the firm has at any given point of time. Accounts receivables turnover ratio is also known as debtors turnover ratio. This indicates the number of times average debtors have been converted into cash during a year.