![]() The first part of the accounts receivable turnover formula calls for your net credit sales, or in other words, all of your sales for the year that were made on credit (as opposed to cash). Net credit sales / Average Accounts Receivable Step 1: Determine your net credit sales. In order to calculate your accounts receivable turnover ratio, you’ll use the following accounting receivable turnover formula: The receivables turnover ratio is also called the accounts receivable turnover ratio. As well as extends to customers and how quickly that short-term debt is paid. The ratio shows how well a company uses and manages credit. The accounts receivable turnover ratio is an accounting measure to quantify a company’s effectiveness in collecting its receivables. In this guide, therefore, we’ll break down the accounts receivable turnover ratio, discussing what it is, how to calculate it, and what it can mean for your business. Moreover, the accounts receivable turnover ratio can be extremely useful-as understanding it can be crucial to your cash flow, to getting a loan, and to your overall business financial planning. Accounts Receivable Turnover RatioĮven though this may sound difficult, once you break down the accounts receivable turnover formula, you’ll find that the ratio is, in fact, rather simple to calculate. ![]() One such calculation, the accounts receivable turnover ratio, can help you determine how effective you are at extending credit and collecting debts from your customers. When it comes to business accounting, there are many formulas and calculations that, although seemingly complex, can nevertheless provide valuable insight into your business operations and financials. ![]() Generally, the higher the accounts receivable turnover ratio, the more efficient your business is at collecting credit from your customers. The ratio is used to measure how effective a company is at extending credits and collecting debts. Receivables Turnover Ratio: Divide net credit sales by average account receivables to calculate the Accounts Receivables. ![]()
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