Quick Definition

The receivables turnover ratio is a financial metric that measures how efficiently a company collects its accounts receivable. It indicates how many times a company's receivables are converted into cash in a given period.

Formula

Examples

• 1A company with a high receivables turnover ratio indicates efficient collection of debts within the fiscal year, leading to better cash flow.
• 2A low receivables turnover ratio might suggest that a company is struggling to collect its debts, which could impact its liquidity.
• 3Comparing the receivables turnover ratios of different companies in the same industry can provide insights into their credit policies and customer payment behaviors.

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