Accounts Receivable Turnover Ratio

Accounts Receivable Turnover Ratio

Formula to calculate Accounts receivable turnover ratio:


Accounts Receivable Turnover Ratio = annual credit sales / average accounts receivable



Accounts Receivable turnover ratio definition and explanation:


This is the ratio of the number of times that accounts receivable amount is collected throughout the year.



A high accounts receivable turnover ratio indicates a tight credit policy.



A low or declining accounts receivable turnover ratio indicates a collection problem, part of which may be due to bad debts.

The accounts receivable turnover ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.