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What is receivable turnover ratio?

Receivable Turnover Ratio or Debtor's Turnover Ratio is an accounting measure used to measure how effective a company is in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.

What happens if Accounts Receivable Turnover is low?

A low accounts receivable turnover is harmful to a company and can suggest a poor collection process, extending credit terms to bad customers, or extending its credit policy for too long. Video Explanation of Different Accounts Receivable Turnover Ratios

What does a high turnover ratio mean?

A high turnover ratio indicates a combination of a conservative credit policy and an aggressive collections department, as well as a number of high-quality customers. A low turnover ratio represents an opportunity to collect excessively old accounts receivable that are unnecessarily tying up working capital.

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