Accounts Receivable Turnover Ratio

The Accounts Receivable Turnover Ratio measures how efficiently a company collects payments from its customers within a specific period. It is calculated by dividing the total credit sales by the average accounts receivable (amount owed by customers). A higher ratio indicates the company collects its receivables more quickly, improving cash flow and reducing the risk of bad debts. Conversely, a lower ratio may suggest delays in collecting payments, which could impact liquidity. This ratio helps assess the company's effectiveness in managing credit sales and customer payments.