Receivables Turnover - How to calculate accounts receivable turnover . In an analysis of the accounts receivable turnover ratio analysis is very important for companies to determine the credit sales policy . The sooner it is doubtful receivables , the better for the company .
Receivables owned by a company has a close relationship with the volume of credit sales . Position and estimated time of collecting receivables can be assessed by calculating the accounts receivable turnover rate by dividing the total credit sales ( net ) with an average accounts receivable .
Accounts receivable turnover can be measured by the formula :
Receivables turnover = Credit sales / Average receivables
The higher the ratio ( turnover ) shows the working capital invested in lower receivables , otherwise if the lower ratio means that there is over-investment in accounts that require further analysis , probably because part of the credit and collection work is ineffective or there may be a change in the policy lending .
A few articles on how to calculate accounts receivable turnover . May be useful :)
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