Definition – What is the Receivables Turnover Ratio?
Receivables turnover ratio is a measurement of how quickly a company collects on their account receivables.
Formula – How to calculate the Receivables Turnover Ratio
Receivables Turnover Ratio = Net Credit Sales / Average Accounts Receivable
A company has net credit sales of $3,000 and average accounts receivable of $3,500.
Receivables Turnover Ratio = $3,000 / $3,500 = 0.86
Therefore, this company has a receivables turnover ratio of 0.86.
Sources and more resources
- Wikipedia – Receivables turnover ratio – A summary of receivables as well as the formula to calculate it.
- Accounting Tools – Accounts receivable turnover ratio – An explanation of accounts receivable turnover and how it is calculated.
- FinanceFormulas.net – Receivables Turnover Ratio – The formula for a receivables turnover ratio.
- The Balance SMB – How to Calculate Accounts Receivable Turnover Ratio – An article on how to calculate accounts receivable turnover.
- Investopedia – Receivables Turnover Ratio – A full description of receivables turnover and how it can be used.