Financial modelling terms explained

Accounts Receivable Turnover

Accounts receivable turnover is a liquidity ratio that measures how well a business can collect its accounts receivable. It is calculated by dividing the average amount of total accounts receivable by the average amount of days, in which a company expects to collect those accounts.

What Is Accounts Receivable Turnover?

Accounts receivable turnover (ART) is a measure of how quickly a company collects its accounts receivable (AR). It is calculated by dividing the company's total AR by its average AR. The higher the ART, the better the company is at collecting its AR.

How Do You Calculate Accounts Receivable Turnover?

The accounts receivable turnover ratio is a measure of how quickly a company collects its accounts receivable. It is calculated by dividing the total revenue generated from accounts receivable by the average accounts receivable balance. This ratio can be used to measure a company's efficiency in collecting payments from customers.

What Does Accounts Receivable Turnover Tell You?

Accounts receivable turnover measures the number of times per year that a company's average accounts receivable balance is collected. It is calculated by dividing the company's total credit sales by the company's average accounts receivable balance. This metric is used to measure a company's credit management efficiency.

A high turnover rate is good because it indicates that the company is collecting its receivables quickly. A low turnover rate is bad because it indicates that the company is not collecting its receivables quickly. This could be due to a number of factors, such as slow collections process or customers who are slow to pay.

Accounts receivable turnover can be used to compare the credit management efficiency of two or more companies. It can also be used to measure the effectiveness of a company's credit management policies and procedures.

What's the Difference Between Accounts Receivable Turnover and Days Sales Outstanding?

Accounts receivable turnover is the number of times that the average accounts receivable balance is collected over the course of a year. This is calculated by dividing the annual credit sales by the average accounts receivable balance.

Days sales outstanding (DSO) is the average number of days it takes to collect accounts receivable. This is calculated by dividing the Accounts Receivable turnover by 365.

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