Explanation of Accounts Receivable Turnover:

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.

Importance of Accounts Receivable Turnover:

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 Receivables 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.

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