Receivables turnover ratio

Receivable Turnover Ratio or Debtor's Turnover Ratio is an accounting measure used to measure how effective a company is in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.[1]

Formula:

\mathrm{Receivable\ Turnover\ Ratio} = {\mathrm{Net\ receivable\ sales}\over\mathrm{Average\ net\ receivables}}[2]

A high ratio implies either that a company operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient. While a low ratio implies the company is not making the timely collection of credit.

Relation ratios

See also

References

  1. "Receivable turnover ratio".
  2. Weygandt, J. J., Kieso, D. E., & Kell, W. G. (1996). Accounting Principles (4th ed.). New York, Chichester, Brisbane, Toronto, Singapore: John Wiley & Sons, Inc. p. 801.
  3. "What is the days' sales in accounts receivable ratio? | AccountingCoach". AccountingCoach.com. Retrieved 2016-02-03.
  4. root. "Average Collection Period Definition | Investopedia". Investopedia. Retrieved 2016-02-03.
  5. Edexcel Accounting general certificate of education revision guide 2012
  6. Edexcel Accounting general certificate of education revision guide 2012


This article is issued from Wikipedia - version of the Wednesday, February 03, 2016. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.