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The accounts receivable turnover ratio measures the number of times a company collects its average accounts receivable balance in a specific time period.
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 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
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.
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 receivable turnover ratio, otherwise known as 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 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.