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 sayed123 December 9th, 2013 05:45 PM

Accounts receivable turnover

what is Accounts receivable turnover ?discuss Accounts receivable turnover in detail?

 taskinuddin December 9th, 2013 06:01 PM

Re: Accounts receivable turnover

Accounts receivable turnover forms a part of the ratio analysis of a firm. It is the ratio which quantifies the effectiveness of a firm%u2019s policy with regards to credit extension and collection of debt. It measures the number of times, the credit is collected throughout an year.
Mathematically, it is expressed as:

Formula:
Accounts Receivable Turnover= (Net Credit Sales)/(Average Accounts Receivable)

A high value for the ratio implies that the firm follows a tight credit policy and manages its receivables efficiently while a low value implies that there are some collection problems and there is need for improvement.
Some firms may not have data about the credit sales and hence net sales is used which makes the ratio a bit deceiving depending on the proportion of cash sales.

Example
Assume,
Annual Credit Sales = Rs. 10,000
Accounts receivable at the beginning of the year = Rs. 1000
Accounts receivable at the end of the year = Rs. 3000
So,
Average Accounts receivable = (1000 + 3000)/2 = Rs. 2000
Accounts Receivable turnover = 10000/2000 = 5

 taskinuddin December 9th, 2013 06:05 PM

Re: Accounts receivable turnover

Generally, each organization provides credit facility to its customers. In such cases, the money owed to the business by its customers (individual or corporation) on account of products/services that have been delivered or used is referred to as accounts receivable.
Accounts Receivable is treated as an asset by the business and can be found under the %u201CCurrent Assets%u201D of the Assets section of a balance sheet.
The customers which owe the business are commonly referred to as %u201CSundry Debtors%u201D.
Technically, an entry which entails credit has both receivables as well as payables. For the organization lending credit, it is accounts receivable while for the organization which owes money, it is an accounts payable.

 rosemarry2 April 20th, 2016 04:05 PM

Re: Accounts receivable turnover

1 Attachment(s)
Quote:
 Originally Posted by sayed123 (Post 489953) what is Accounts receivable turnover ?discuss Accounts receivable turnover in detail?
Hey mate,

Here I am up-loading Accounts Receivable Turnover Ratio, please check attachment below.

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