![]() The receivables turnover ratio is calculated as the ratio of sales proceeds to the average amount of receivables for the period. BooksTime makes sure your numbers are 100% accurate so you can focus on growing your business. Keeping proper financial records is time-intensive and small mistakes can be costly. The indicator measures the efficiency of work with customers in terms of collection of receivables, and also reflects the organization’s policy regarding sales on credit. The indicator determines how many times accounts receivable were successfully turned into cash or how much revenue was received from 1 dollar of accounts receivable. The value of the ratio demonstrates the number of accounts receivable (AR) turnovers, that is, how many times the debtors have paid off their obligations to the company during the reporting period. Receivables turnover ratio: DefinitionĪn accounts receivable turnover ratio is an indicator of business activity that shows the effectiveness of managing the debt of clients and other debtors. If the profit from an increase in sales exceeds the cost of attracting additional borrowed funds, an increase in the turnover of accounts receivable will have a positive effect. On the other hand, selling on credit to customers contributes to an increase in the level of sales due to the fact that for many customers, deferred payment is a priority when choosing a seller/supplier. ![]() A significant amount of accounts receivable can lead to a need to attract additional funds due to the outflow of the company’s own cash. ![]() The impact of accounts receivable on the company’s financial position is ambiguous. ![]()
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