Receivables Turnover Ratio

The Receivable Turnover ratio is used to calculate how well a company is managing its receivables. It is also known as accounts receivable turnover ratio. The lower the amount of uncollected monies from its operations, the higher this ratio will be.

EXAMPLE

BubleTech company’s sales for the year 2013 were $7,000,000 and its average balance in accounts receivable for the same twelve months was $700,000. The company's accounts receivable turnover ratio is 10. This indicates that on average the company’s accounts receivables turned over 10 times during the year, or approximately every 36 days (365 days per year divided by the turnover of 10).