Receivables Turnover Calculator

More about the Receivables Turnover so you can better use the results provided by this finance calculator.

The Receivables Turnover is the ratio between sales and the average accounts receivables. This ratio is a measure of asset management, and it roughly indicates how many times a year a firm collects its outstanding credit accounts.

How do you calculate the Receivables Turnover?

In order to calculate the Receivables Turnover, we use the following formula:

\[ \text{Receivables Turnover} = \displaystyle \frac{\text{Sales}}{\text{Average Accounts Receivables}}\]

More efficiency ratios and others

The Receivables Turnover is a broadly used financial ratio to measure efficiency in credit accounts management. We provide many other financial ratio calculators in our site, including our current ratio , quick ratio , our days' sales in receivables , and our inventory turnover calculator.

Example of the calculation of receivables turnover

Question: Assume that a firm has sales for $10,000, and its current accounts receivable are $2,000, and the previous accounts receivable were $2,500. Compute the receivables turnover for the firm.

Solution:

This is the information we have been provided with:

Sales =	\(10000\)
Current Accounts Receivables =	\(\text{\textdollar}2000\)
Previous Accounts Receivables =	\(\text{\textdollar}2500\)

Hence, the Receivables Turnover is computed using the following formula:

\[ \begin{array}{ccl} \text{Receivables Turnover} & = & \displaystyle \frac{\text{Sales}}{\text{Average Accounts Receivables}} \\\\ \\\\ & = & \displaystyle \frac{\text{\textdollar}10000}{(\text{\textdollar}2000+\text{\textdollar}2500)/2} \\\\ \\\\ & = & \displaystyle \frac{\text{\textdollar}10000}{\text{\textdollar}2250} \\\\ \\\\ & = & 4.44 \end{array} \]

Therefore, the receivables turnover is \(4.44\), for the given sales of \(\text{\textdollar}10000\), current accounts receivables of \(\text{\textdollar}2000\), and previous account receivables of \(\text{\textdollar}2500\). This means that firm turns its receivables over \(4.44\) times, or otherwise said, the firm collects its outstanding credit accounts \(4.44\) times a year.