accounts receivable (A/R) turnover



Ratio that shows the relationship between unpaid credit sales to total credit sales. It indicates, in general, the effectiveness (or lack of it) of a firm's credit policies and cash collection efforts. Formula: Outstanding accounts receivable (in an accounting period) √∑ credit sales revenue (in the same period). Also called receivable turnover.

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  • The accounts receivable turnover was poor because we would send our invoices with the NET 30 terms but we could say nothing if clients paid in 90 days.

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  • Although the business did not have much liquid assets, they were approved for the loan because the accounts receivable turnover was deemed sufficient for the terms and conditions.

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  • I recently was denied receivables financing by bank due to their concerns about the average duration of outstanding invoices as measure by my accounts receivable turnover ration.

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