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How to Calculate Accounts Receivable Turnover.
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How to Calculate Accounts Receivable Turnover.

Rosemary Njeri

The receivables turnover ratio is an accounting method used to quantify how effectively a business extends credit and collects debts on that credit.

A high accounts receivable turnover is desirable as it indicates that the company enjoys a high-quality customer base that is able to pay their debts quickly.

Formula to calculate accounts receivable turnover.

Calculate Accounts Receivables Turnover.

Example:

Suppose a firm’s net credit sales in a certain financial year was $ 50,000 while the average accounts receivables were $ 20,000. Calculate the accounts receivable turnover.

Calculate Accounts Receivables Turnover.

Therefore, the accounts receivable is 2.5.

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