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Calculate the receivables turnover ratio for Green Tea Products USA during the end of its fiscal year, when:
Calculate accounts receivable turnover for The Bling Center of Atlanta, when:
Accounts receivable turnover is an activity ratio. It estimates the number of times a business collects its average accounts receivable balance during a time period. It is calculated as the ratio of net credit sales of a business to its average accounts receivable value during a given period, usually a year.
The ratio measures how efficiently a business collects its credit sales. Analysts use this value when they want to measure how long it takes a company to collect its debts.
Generally, a high a accounts receivable turnover rate is favorable because it indicates speedy collections. However, very high values of this ratio may not be favorable, especially if they are achieved by extremely strict credit terms. In this case, tight credit policies can drive away potential customers.
Receivables turnover = net credit sales ÷ average accounts receivable