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Receivable Turnover Ratio
What does it mean?
An accounting measure used to quantify a firm's effectiveness in extending credit and success in collection of debts.
In Other Words...
By maintaining accounts receivable, firms are indirectly extending interest free loans to their clients. A high ratio implies that the company operates either on a cash basis, or its extension of credit and collection of accounts receivable is efficient. A low ratio implies that the company should re-assess its credit policies in order to ensure the timely collection of imparted credit not earning interest for the firm.
The common formula used for this ratio is net sales divided by the value of accounts receivable.
Related Links
Introduction to Fundamental Analysis - Here's an easy-to-understand tutorial on the techniques of analyzing a company's financial statements, including the annual and quarterly reports, the auditor's report, and much more.
Related Terms
Accounts Payable | Accounts Receivable | Net Receivables
1 |
A | B |
C | D |
E | F |
G | H |
I | J |
K | L |
M | N |
O | P |
Q | R |
S | T |
U | V |
W | X |
Y | Z
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