Measures how efficiently a company collects its receivables.

What it Measures ?

How quickly we collect money from customers.

Relevant StakeHolders 

Accounts Receivable Team, CFO

In-depth Use Case / Real-world Example

Receivables Turnover Ratio is calculated by dividing net credit sales by the average accounts receivable. For example, if a company has ₹1,000,000 in net credit sales and an average accounts receivable of ₹200,000, the receivables turnover ratio is 5. This means the company collects its outstanding receivables five times a year. A high ratio suggests efficient collection and strong liquidity, while a low ratio might indicate poor collection practices or high overdue receivables. By tracking this ratio, companies can assess how effectively they manage their credit policies and ensure that funds are quickly available for reinvestment.