Receivables turnover calculator

To calculate the receivables turnover ratio, you need two key pieces of information: net credit sales and average accounts receivable.

1. Net credit sales: This represents the total sales made on credit during a specific period, excluding any cash sales. You can find this information on the company’s income statement.

2. Average accounts receivable: This is the average amount of money owed to the company by its customers during a specific period. To calculate this, add the beginning and ending accounts receivable balances for the period and then divide by 2.

Once you have these figures, you can use the following formula to calculate the receivables turnover ratio:

Receivables turnover ratio = Net credit sales/Average accounts receivable

Simply divide the net credit sales figure by the average accounts receivable figure to obtain the receivables turnover ratio. This ratio indicates how efficiently a company is collecting payments from its customers. A higher ratio typically suggests more effective management of accounts receivable.