{"id":49,"date":"2024-05-20T09:36:50","date_gmt":"2024-05-20T09:36:50","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/?post_type=glossary&p=49"},"modified":"2024-05-21T06:41:50","modified_gmt":"2024-05-21T06:41:50","slug":"receivables-turnover-ratio","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/receivables-turnover-ratio\/","title":{"rendered":"Receivables Turnover Ratio"},"content":{"rendered":"

Frequently, enterprises are obligated to grant credit to their customers, allowing the latter to obtain the merchandise without promptly settling the accompanying invoices. It is incumbent upon the management of a corporation to ensure that any outstanding receivables are collected within the designated timeframe; failure to do so will result in a negative impact on the cash flow<\/a> of the business.<\/p>\n\n\n\n

The approach employed to assess the effectiveness with which receivables are collected and such debts are extended is referred to as the receivables turnover ratio<\/a>. Asdicated by the receivables ratio, a business’s ability to manage these short-term credits is determined.<\/p>\n\n\n\n

The accounts receivable turnover ratio is an alternative name for this efficacy metric, in addition to receivables turnover.<\/p>\n\n\n\n

Formula in Mathematics Denoting the Receivables Turnover Ratio
Two key variables—average accounts receivable and net credit sales—are crucial in determining the receivables turnover ratio for a specific organization. This yield<\/a>s the formula for the receivables turnover ratio:<\/p>\n\n\n\n

Receivables turnover ratio = average accounts receivable divided by net credit sales<\/p>\n\n\n\n

The average accounts receivable can be calculated by adding the accounts receivable at the start and end of the given period and then dividing the result by two.<\/p>\n\n\n\n

To illustrate, in order to calculate the receivables turnover ratio for the second quarter of a specific year, it is necessary to aggregate the tangible receivables at the beginning and end of this quarter prior to dividing the result by 2.<\/p>\n\n\n\n

In a similar vein, net credit sales pertain to the revenue<\/a> produced by credit-completed sales subse<\/a>quent to the deduction of customer returns. Thus,<\/p>\n\n\n\n

Customer returns minus gross credit sales equals net credit sales.<\/p>\n","protected":false},"excerpt":{"rendered":"

Frequently, enterprises are obligated to grant credit to their customers, allowing the latter to obtain the merchandise without promptly settling the accompanying invoices. It is incumbent upon the management of a corporation to ensure that any outstanding receivables are collected within the designated timeframe; failure to do so will result in a negative impact on […]<\/p>\n","protected":false},"author":3,"featured_media":0,"menu_order":0,"template":"","meta":{"footnotes":""},"class_list":["post-49","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/49","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":0,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/49\/revisions"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=49"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}