Given here is the formula to calculate receivables turnover ratio. It can be calculated by dividing net credit sales by the average net accounts receivables during the year. Accounts receivables turnover ratio formula is derived as Ratio = (Net Credit Sales / Average Account Receivable). The receivables turnover ratio also termed as debtor's turnover ratio. It is calculated annually and not on quarterly or monthly accounts receivable turnover as well.
From the given accounts receivables turnover ratio formula, it has been proved that lower the amount of uncollected receivables from its operations will be higher the ratio. That is if a company has more revenue awaiting receipt, the lower the ratio will be. Calculating the receivables turnover ratio helps you to assess how well a company is managing their receivables.
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