This calculator helps businesses and financial analysts determine how efficiently a company manages its accounts receivable. By calculating the receivables turnover ratio, stakeholders can assess how well a company is using its assets to generate sales.
Calculator
Data Source and Methodology
All calculations are based on standard financial formulas and data sourced from authoritative financial publications. Ensure you apply the correct values to achieve accurate results.
The Formula Explained
Receivables Turnover Ratio: Turnover Ratio = Net Credit Sales / Average Accounts Receivable
Glossary of Terms
- Net Credit Sales: Total sales made on credit, minus returns and allowances.
- Average Accounts Receivable: The average amount of money owed to a company by its debtors over a certain period.
- Receivables Turnover Ratio: A measure of how efficiently a company collects its outstanding credit accounts.
FAQ
What is the ideal receivables turnover ratio?
The ideal ratio varies by industry, but generally, a higher ratio indicates efficient credit and collections processes.
How can I improve my company's receivables turnover ratio?
Consider tightening credit policies, improving collection efforts, and offering discounts for early payments.
Why is the receivables turnover ratio important?
This ratio helps identify how efficiently a company uses its assets and can indicate financial health.
Tool developed by Ugo Candido. Content reviewed by eCapital Expert Team.
Last reviewed for accuracy on: October 5, 2023.