Receivables Turnover Ratio Calculator

Measure how efficiently a company collects its accounts receivable

Financial Data

Net Credit Sales ($)

Beginning Accounts Receivable ($)

Ending Accounts Receivable ($)

Receivables Analysis

Receivables Turnover Ratio

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times

How often receivables are collected annually

Days Sales Outstanding

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days

Average collection period

Average Receivables

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$

Mean accounts receivable balance

Collection Efficiency Dashboard

25%

50%

75%

100%

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Turnover Ratio

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DSO

Turnover Ratio (Higher is better)

Days Sales Outstanding (Lower is better)

Financial Health Analysis

Industry Benchmark Comparison

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Collection Efficiency Assessment

Assessment will appear here...

This calculator helps assess accounts receivable management efficiency. Higher ratios indicate faster collection. Print Results

1. What is the Receivables Turnover Ratio?

The Receivables Turnover Ratio measures how efficiently a company collects payments from customers. It indicates:
✔ How quickly credit sales are converted to cash
✔ Effectiveness of credit and collection policies

Key Takeaways

• Higher Ratio = Faster collections (good)

• Lower Ratio = Delays in payment (potential liquidity risk)

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2. Receivables Turnover Ratio Formula

$$\text{Receivables Turnover Ratio}=\frac{\text{Net Credit Sales}}{\text{Average Accounts Receivable}}$$

Where:

• Net Credit Sales = Total sales on credit (exclude cash sales & returns).

• Average Accounts Receivable = $\frac{\text{Beginning AR}+\text{Ending AR}}{2}$

(If beginning AR is unavailable, use ending AR alone.)

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3. How to Calculate (Step-by-Step Example)

Example Data:

• Net Credit Sales (Annual): $500,000

• Accounts Receivable (Beginning of Year): $50,000

• Accounts Receivable (End of Year): $30,000

Step 1: Compute Average Accounts Receivable

$$\text{Average AR}=\frac{50,000+30,000}{2}=\mathrm{\$}40,000$$

Step 2: Apply Receivables Turnover Formula

$$\text{Receivables Turnover Ratio}=\frac{500,000}{40,000}=\mathbf{\text{12.5}}$$

Interpretation:

• The company collects its receivables 12.5 times per year.

• Average collection period = $\frac{365}{12.5}\approx 29.2\text{ days}$.

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4. How to Use a Receivables Turnover Calculator

1. Enter Net Credit Sales → $500,000

2. Input Beginning & Ending AR → $50K & $30K

3. Click "Calculate" → Ratio = 12.5x

4. Optional: Compute Average Collection Period (365 / Ratio)

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5. Industry Benchmarks

Industry	Typical Receivables Turnover
Retail	20-30x
Manufacturing	8-12x
Services	10-15x

(Higher is better, but compare with industry averages.)

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6. Why This Ratio Matters

✅ Liquidity Check – Ensures cash flow stability.
✅ Credit Policy Assessment – Identifies inefficiencies in collections.
✅ Investor & Lender Analysis – Shows financial health.