I. Concept explanation
The turnover rate of accounts receivable refers to the average number of times that accounts receivable are converted into cash in a certain period. The turnover rate of accounts receivable, also known as the collection rate, is an index used to measure the liquidity of accounts receivable of enterprises. It is the ratio of net credit sales to the average balance of accounts receivable in a certain period of time.
Accounts receivable turnover rate is the ratio of sales revenue divided by average accounts receivable, that is, the average number of times accounts receivable are converted into cash in one year, which indicates the speed of accounts receivable flow.
The turnover rate expressed in time is the average recovery period, which is also called the average recovery period of accounts receivable or the average cash recovery period. It means that the time required for an enterprise to obtain the right of accounts receivable to recover the money and convert it into cash is equal to 360 divided by the turnover rate of accounts receivable.
Second, the theoretical formula
1, accounts receivable turnover rate = net income from credit sales.
2. Average balance of accounts receivable = current net sales income-current cash sales income (opening balance of accounts receivable+closing balance of accounts receivable) /2.
3. Average collection period =365.
Third, the use of formulas.
1, accounts receivable turnover rate = current net sales income (opening accounts receivable balance+closing accounts receivable balance) /2.
2. Average collection period =360.