What is the Account Receivable Turnover?

Turnover is a calculation of how fast a firm conducts its operations. It is generally used to determine how fast a firm sells off their inventory and take money from their account receivable. 

A company's total revenue can also be referred to as its overall turnover.

The Receivables Turnover Ratio demonstrates how many times receivables are collected in a given period. 

Receivables turnover ratio = Credit sales/Average accounts receivable

Let us assume that credit sales are not immediately paid in cash, then we can say that the account receivable turnover formula is the volume of credit sales per average account receivable.

Here, the average account receivable is the median receivable balances in a given period. Account receivable turnover evaluates your payments rates compared to credit sales. The general idea of this formula is to maximize sales and reduce credit sales so as to avoid debt or to increase profit. 

A company with $20,000 in credit sales and $5000 in paid purchases is said to have a turnover rate of four using the average account receivable formula.

Related Topics

• Trend Analysis of Financial Statements
• Common-Size Analysis (Vertical Analysis) of Financial Statements
• Common-Size Financial Statement
• Net Dollar Retention
• Horizontal Analysis
• Per Share Basis
• Profitability Ratios
• Gross Margin Ratio
• Profit Margin
• After Tax Profit Margin
• Return on Assets
• Total Shareholder Return
• Cash on Cash Return
• Earnings Per Share
• Diluted Earnings Per Share
• Asset Turnover Ratio
• Berry Ratio
• Break-Even Analysis
• Liquidity Ratio
• Current ratio  (Working Capital Ratio)
• Working Ratio
• Quick Ratio
• Quick Assets
• Days Sales Outstanding
• Cash Ratio (Operating Cash Flow Ratio)
• Receivables turnover ratio (often converted to average collection period)
• Accounts Payable Turnover Ratio
• Inventory turnover ratio (often converted to average sale period)
• Solvency (Coverage Ratios)
• Leverage Ratio (Debt Ratio)
• Asset Coverage Ratio
• Debt to Equity
• Debt to Income Ratio
• Debt Coverage Ratio
• Times Interest Earned
• Market Capitalization
• Price to Equity Ratio
• Book-To-Market Ratio
• Price to Earnings Ratio
• Price to Earnings Growth (PEG) Ratio
• Price to Earnings Growth Payback Ratio
• CAPE Ratio
• Price to Cash Flow Ratio
• Capital Maintenance
• Book to Bill Ratio
• Asset Turnover Ratio
• Plowback Ratio 
• Days Inventory Outstanding
• Days Payable Outstanding
• Days Sales Outstanding
• Non-financial Performance Measures: The Balance Scorecard