Accounts receivable turnover ratio

Accounts receivable turnover = Net credit sales/Net accounts 

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Similarly good management practice is to hold accounts receivable at a low level and to have a high accounts-receivable-turnover ratio, as given by... 

An accounts-receivable-turnover ratio of 12 is considered fairly good for a manufacturing company This implies an average collection period of about 1 month. The price obtained for the goods should include an allowance for interest (otherwise obtainable) on the money tied up for such a period. 

As with the accounts receivable turnover ratio, accounts payable turnover can be stated in the number of days it takes to pay suppliers as follows ... 

The efficiency ratio, also called the activity ratio, measures the speed at which a company moves its assets through operations. The efficiency and solvency ratios can be used together to effectively assess fhe firm s solvency position. Two of the most common activity ratios are the accounts receivable turnover and inventory turnover ratios. 

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