A/R Turnover Ratio

Measure your efficiency. Calculate how many times your business collects its average accounts receivable balance during a specific period.

Total sales made on credit (excluding cash sales).
Turnover Ratio
10.0
Times per Year
Avg. Collection Period
36.5 Days
Liquidity Status
Healthy

What does this ratio tell you?

I genuinely believe that "Cash is King" in business. The Accounts Receivable (AR) Turnover ratio is a measure of how effectively your company is managing its credit. A high ratio implies that you are collecting your debts promptly and that your customers are paying on time.

Low Ratio Warnings: A low ratio might suggest that your company has a poor collection process, bad credit policies, or that your customers are struggling financially.

Key Metrics:

  • Avg. Collection Period: Also known as Days Sales Outstanding (DSO). It tells you exactly how many days, on average, it takes to get paid after a sale is made.
  • Net Credit Sales: Only include sales where credit was extended. Cash-on-delivery (COD) sales should be excluded for an accurate ratio.