Click here for a downloadable spreadsheet that automatically calculates these ratios using financial statement inputs that you provide.Click here for detailed explanations on creating the ratios for Stock Investor Pro users.The receivables turnover indicates how many times per period the company collects and turns into cash its customers’ accounts receivable.In Table 1, the receivables turnover is 7.8x, signaling that, on average, receivables were fully collected 7.8 times during the period or once every 47 days (365 ÷ 7.8).The receivables turnover ratio is calculated by dividing net revenue by average receivables.This ratio is a measure of how quickly and efficiently a company collects on its outstanding bills.
However, financial ratios vary across different industries and sectors and comparisons between completely different types of companies are often not valid.
Table 1 shows the formulas with examples for each of the ratios discussed.
Activity ratios are used to measure how efficiently a company utilizes its assets.
Alternatively, a low or declining turnover can signal that customers are struggling to pay their bills.
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