What Is Accounts Receivable Turnover Ratio?
The Accounts Receivable Turnover Ratio (ART) measures how efficiently a company is collecting payments on its outstanding invoices. The ratio is calculated by dividing net sales by average accounts receivable.
A high ratio indicates that the company is collecting payments quickly, while a low ratio suggests that the company is having trouble collecting payments. The ratio can be used to assess the company's credit risk and to determine the need for a credit line.
How Do You Calculate Accounts Receivable Turnover Ratio?
The accounts receivable turnover ratio (ARTR) measures a company's ability to collect payments on its outstanding invoices. The ratio is calculated by dividing net sales by average accounts receivable.
The ARTR can be used to measure a company's effectiveness in managing its accounts receivable. A high ARTR indicates that the company is able to collect payments on its outstanding invoices quickly, while a low ARTR indicates that the company is taking longer to collect payments. The ARTR can also be used to compare a company's performance with its competitors.
