How to Calculate Accounts Receivable Turnover?

This measures how effectively the company collects money from customers on time. It reflects the number of times the average AR balance is converted to cash during a period, typically a year. It’s a ratio calculated by dividing net sales by the average AR balance during the period. A higher AR turnover is generally desirable. The formula for AR turnover is: Accounts receivable turnover = Sales on account / Average accounts receivable balance for period

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