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Sunday, June 12, 2011

Accounts Receivable Turnover Ratio Analysis

Definition: Accounts Receivable Turnover Ratio calculate the number of times that trade receivables turnover during the accounting period. The higher the ratio, the faster the business is collecting its receivables.

Formula:

Accounts Receivable Turnover Ratio = Net Sales / Average Accounts Receivable

Example 1:
Total sales (include cash sales of $10,000): $70,000
Accounts Receivable: $50,000

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