Accounting / July 9, 2018 / Justice Buckley
The Receivables Turnover and Days' Receivables Ratios assess the firm's management of its Accounts Receivables and, thus, its credit policy. In general, the higher the Receivables Turnover Ratio the better since this implies that the firm is collecting on its accounts receivables sooner. However, if the ratio is too high then the firm may be offering too large of a discount for early payment or may have too restrictive credit terms. The Receivables Turnover Ratio is calculated by dividing Sales by Accounts Receivables.
To an extent, you can outsource the day-to-day financial management of your business to a bookkeeper along with a certified public accountant. Even so, you’ll want to understand these basic accounting terms so that you can make sense of the feedback and recommendations that your financial advisers give you.
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