Receivables turnover ratio
Encyclopedia
Receivable Turnover Ratio is one of the accounting activity ratios, a financial ratio
. This ratio measures the number of times, on average, receivables (e.g. Accounts Receivable
) are collected during the period. A popular variant of the receivables turnover ratio is to convert it into an Average Collection Period in terms of days. Remember that the Receivable turnover ratio is figured as "turnover times" and the Average collection period is in "days".
Financial ratio
A financial ratio is a relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization...
. This ratio measures the number of times, on average, receivables (e.g. Accounts Receivable
Accounts receivable
Accounts receivable also known as Debtors, is money owed to a business by its clients and shown on its Balance Sheet as an asset...
) are collected during the period. A popular variant of the receivables turnover ratio is to convert it into an Average Collection Period in terms of days. Remember that the Receivable turnover ratio is figured as "turnover times" and the Average collection period is in "days".
Sources
- Receivables Turnover Ratio = Net receivable sales/ Average net receivables
- Average Collection Period = 365 / Receivables Turnover Ratio