How is Accounts Receivable Turnover Ratio calculated?

The receivables turnover ratio is calculated on an annual, quarterly, or monthly basis. Accounts receivables appear under the current assets section of a company's balance sheet. The accounts receivable turnover ratio is the relationship between net credit sales and average accounts receivable: Accounts Receivable Turnover.

How do you calculate AR turnover?

The formula for calculating the AR turnover rate for a one-year period looks like this: Net Annual Credit Sales ÷ Average Accounts Receivables = Accounts Receivables Turnover For example, Flo’s Flower Shop sells floral arrangements for corporate events and accepts credit. The shop totaled $100,000 in gross sales.

What was Accounts Receivable Turnover in 2010?

In 2010, a company had a gross credit sale of $1000,000 and $200,000 worth of returns. On 1st January 2010, the accounts receivable was $300,000, and on 31st December 2010 was $500,000. Based on the above information, let us use the accounts receivable turnover calculator to find the ratio:

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