Accounts Receivable Turnover Ratio

The accounts receivable turnover ratio measures how efficiently a company collects payments from its customers within a specific period, usually a year. It is calculated by dividing net credit sales by the average accounts receivable during that period. A higher turnover ratio generally indicates that a company is effectively managing its credit policies and collecting payments promptly, while a lower ratio may suggest inefficiencies in receivables management or potential issues with customer creditworthiness.