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The accounts receivable turnover ratio formula is as follows: Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable. Where: Net credit sales are sales where the cash is collected at a later date. The formula for net credit sales is = Sales on credit – Sales returns – Sales allowances.
The accounts receivable turnover ratio measures the number of times a company collects its average accounts receivable balance in a specific time period.
The receivable turnover ratio, otherwise known as the debtor’s turnover ratio, is a measure of how quickly a company collects its outstanding accounts receivables. The ratio shows how many times during the period, sales were collected by a business.
Accounts Receivable (AR) Turnover Ratio Formula & Calculation. Also known as the “receivable turnover” or “debtors turnover” ratio, the accounts receivable turnover ratio is an efficiency ratio — specifically an activity financial ratio — used in financial statement analysis.
The formula for calculating the accounts receivable turnover ratio divides the net credit sales by the average accounts receivable for the corresponding periods. Accounts Receivable Turnover = Net Credit Sales ÷ Average Accounts Receivable
Accounts receivable turnover ratio = (Net credit sales) / (Average accounts receivable) Use this formula to calculate the receivables turnover ratio for your business at least once every quarter. Track and compare these results to identify any trends or patterns that may develop.
The accounts receivable turnover ratio (A/R turnover) is a measure of how quickly a company collects its accounts receivable. It is calculated by dividing the annual net sales revenue by the average account receivables.
This article will explain to you the receivables turnover ratio definition and how to calculate receivables turnover ratio using the accounts receivable turnover ratio formula. Additionally, you will learn what does a high or low turnover ratio mean, and what are the consequences of each.
Accounts receivable turnover is calculated by dividing net credit sales by the average accounts receivable for that period. The reason net credit sales are used instead of net sales is that cash sales don’t create receivables.
The receivables turnover ratio is used to calculate how well a company is managing their receivables. The lower the amount of uncollected monies from its operations, the higher this ratio will be. In contrast, if a company has more of its revenues awaiting receipt, the lower the ratio will be.