Accounts Receivable Turnover Ratio = (Net Credit Sales Revenue/Average Balance of Accounts Receivable) x 100%.
Accounts Receivable Turnover Ratio is the average number of times accounts receivable are converted to cash during the specified period of analysis. There are theoretical and applied formulas for its calculation, and the difference between the two lies only in whether or not sales revenue includes current sales revenue. The current sales business can be interpreted as credit sales at the same time the collection of payment, so that sales revenue including current sales revenue of the application of the formula, also in line with the meaning of the accounts receivable turnover index .
The following cases using this indicator does not reflect the actual situation: first, seasonal business; second, a large number of installment receipts settlement; third, a large number of sales using cash settlement.
Accounts Receivable:
It is another important item of the enterprise's current assets in addition to inventory. Accounts receivable turnover ratio is the ratio of net income from credit sales to the average accounts receivable balance of a business over a certain period of time. It is an indicator of the speed of accounts receivable turnover and management efficiency of an enterprise.
Accounts receivable of a company have a pivotal position in current assets. If the company's accounts receivable can be collected in time, the efficiency of the company's capital utilization can be greatly improved. Accounts receivable turnover is the ratio that reflects the turnover speed of the company's accounts receivable. It indicates the average number of times a company's accounts receivable are converted to cash in a given period.
Accounts receivable turnover expressed in terms of time is the number of days in which accounts receivable turnover occurs, also known as the average accounts receivable collection period or average collection period. It indicates the time it takes for a company to go from acquiring rights to accounts receivable to collecting the money and turning it into cash.