Accounts Receivable Turnover

The number of times Accounts Receivable were collected during the year, measuring a company's ability to collect sales on credit from its customers.

The Accounts Receivable Turnover measures the number of times Accounts Receivable were collected during the year. This is also a measure of how well the company collects sales on credit from its customers, just as Average Collection Period measures this in days.

A high, or increasing Accounts Receivable Turnover is usually a positive sign - showing the company is successfully executing its credit policies and quickly turning its Accounts Receivable into cash. A possible negative aspect to an increasing Accounts Receivable Turnover is the company may be too strict in its credit policies and missing out on potential sales.

Tags: Financial Ratio