Accounts receivable turnover ratio measures how efficiently a company collects its receivables. It indicates the number of times average accounts receivable are collected during a specific period.
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It is calculated by dividing net credit sales by average accounts receivable.
A higher ratio suggests efficient collection processes and effective credit policies.
A lower ratio may indicate issues with customer creditworthiness or collection processes.
It can be used to compare against industry benchmarks to assess relative performance.
The ratio can impact the company's liquidity and cash flow management.