Receivables turnover ratio

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Receivable 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[edit]

See also[edit]

References[edit]

  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. ^ 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. 800.
  4. ^ Edexcel Accounting general certificate of education revision guide 2012
  5. ^ Edexcel Accounting general certificate of education revision guide 2012