Receivables Turnover Ratio Calculator

Net Credit Sales :

Average Accounts Receivable :

Accounts Receivable Turnover =  


Account Receivable Turnover Ratio Formula

Receivables Turnover =

Net Credit Sales / Average Account Receivables


What is Receivables Turnover Ratio?

Receivables Turnover is an accounting tool used by companies to evaluate how well they choose their customers (who they extend credit to) and how well they collect on their debts. A high ratio is a good sign and means they do well collecting debts; this could also mean that their sales are primarily from a cash basis, so be aware of this when evaluating this measure. In short, this ratio measures how efficient, and effective, a firm utilizes its assets.


Accounts Receivable Turnover Ratio is calculated with net credit card sales and the average accounts receivable; note that the time periods must be the same. Divide net credit sales by average accounts receivable.


Accounts Receivable Turnover Ratio Calculator (back to top of page)

Receivables Turnover Sample Problem

Shoeburger Corp has $600,000 in net credit sales during a given year. On January 1st Shoeburger Corp had $50,000 in accounts receivable and on December 31 (of the same year) they had $58,000 accounts receivable. Given this information, we can calculate the accounts receivable turnover ratio for the given year.


First, we calculate Average Accounts Receivable:
($50,000 + $58,000) / 2 = $54,000

Next, we can complete the receivables turnover ratio calculation:

$600,000 / $54,000 = 11.11


Based on this information, we see that Shoeburger Corp collects receivables 11.11 times per year, on average. With this, we can now figure out how many days the company receives payment (average accounts receivable turnover); 365 / 11.11 = 32.85 days. So, on average it takes Shoeburger customers 33 (rounding 32.8 up) days to pay their bills. Using this, if Shoeburger has a 30 day policy (N30 terms) for payment, the company may want to consider implementing a late charge fee because their customers are making late payments per their policy.