Accounts Receivable Turnover ratio estimates a firm’s effectiveness with which it collects the credit from its debtors. Accounts Receivable Turnover ratio is calculated by dividing the net credit sales with by the average accounts receivable.
One of the top priorities of business owners should be to keep an eye on their accounts receivable turnover. Making sales and excellent customer service is important but a business can’t run on a low cash flow. Collecting your receivables is definite way to improve your company’s cash flow.
It measures how efficiently and quickly a company converts its account receivables into cash within a given accounting period. Accounts Receivable (AR) Turnover Ratio Formula & Calculation: The AR Turnover Ratio is calculated by dividing net sales by average account receivables.