📊 Receivables Turnover Ratio Calculator
Calculate receivables turnover ratio
Average of beginning and ending accounts receivable
How to Use This Calculator
Enter Net Credit Sales
Input the net credit sales - total credit sales minus returns and allowances for the period (typically annual).
Enter Average Accounts Receivable
Enter the average accounts receivable - the average of beginning and ending accounts receivable for the period. Average = (Beginning AR + Ending AR) / 2.
Review Receivables Turnover
See the receivables turnover ratio - how many times receivables are collected per year. Higher ratio indicates faster collection. Also see Days Sales Outstanding (DSO) - average collection period.
Formula
Receivables Turnover = Net Credit Sales / Average Accounts Receivable
Days Sales Outstanding (DSO) = 365 / Receivables Turnover
Example Calculation:
If net credit sales $1,000,000, average accounts receivable $100,000:
• Receivables turnover = $1,000,000 / $100,000 = 10x
• DSO = 365 / 10 = 36.5 days
• This means receivables are collected 10 times per year, with an average collection period of 36.5 days
About Receivables Turnover Ratio Calculator
A receivables turnover ratio calculator helps you calculate how efficiently a company collects its accounts receivable. Receivables Turnover = Net Credit Sales / Average Accounts Receivable. The ratio measures how many times receivables are collected per year. Higher ratios indicate faster collection and better credit management. Days Sales Outstanding (DSO) = 365 / Receivables Turnover, which shows the average collection period. Understanding receivables turnover helps assess credit policy effectiveness and cash flow management.
When to Use This Calculator
- Credit Analysis: Assess credit management efficiency
- Cash Flow Analysis: Analyze cash collection speed
- Financial Analysis: Evaluate receivables management
- Performance Comparison: Compare collection efficiency
Understanding Receivables Turnover
- Higher Ratio: Faster collection (better credit management)
- Lower Ratio: Slower collection (may indicate credit policy issues)
- DSO: Average collection period in days
- Cash Flow: Higher turnover improves cash flow
Why Use Our Calculator?
- ✅ Credit Analysis: Calculate receivables turnover accurately
- ✅ Cash Flow Analysis: Analyze collection speed
- ✅ Financial Analysis: Evaluate receivables management
- ✅ Performance Comparison: Compare collection efficiency
- ✅ 100% Free: No registration or payment required
Frequently Asked Questions
What is receivables turnover ratio?
Receivables turnover ratio measures how efficiently a company collects its accounts receivable. Receivables Turnover = Net Credit Sales / Average Accounts Receivable. The ratio measures how many times receivables are collected per year. Higher ratios indicate faster collection and better credit management. Days Sales Outstanding (DSO) = 365 / Receivables Turnover, which shows the average collection period. Understanding receivables turnover helps assess credit policy effectiveness and cash flow management.
What's a good receivables turnover ratio?
A good receivables turnover ratio depends on the industry and credit terms. Generally, higher ratios (10x+) are better, indicating faster collection. However, ratios vary by industry: Retail (20-50x), Services (10-20x), Manufacturing (5-15x). Compare to industry benchmarks and historical trends. Also consider DSO - lower DSO (30-45 days) is generally better. A ratio that's too high may indicate overly strict credit terms, while too low may indicate collection problems.
What is Days Sales Outstanding (DSO)?
Days Sales Outstanding (DSO) is the average number of days it takes to collect receivables. DSO = 365 / Receivables Turnover. Lower DSO indicates faster collection and better cash flow. DSO of 30-45 days is generally good, while DSO above 60 days may indicate collection problems. DSO helps assess credit policy effectiveness and cash flow management. Understanding DSO helps identify collection issues and optimize credit terms.
How do I improve receivables turnover?
To improve receivables turnover: (1) Credit policy - review and tighten credit terms, (2) Collection process - improve collection procedures and follow-up, (3) Customer selection - better screen customers and creditworthiness, (4) Incentives - offer discounts for early payment, (5) Penalties - charge interest on overdue accounts, (6) Automation - automate invoicing and collection. Improving receivables turnover increases cash flow and reduces bad debt risk. Faster collection improves liquidity and financial health.