Keyword Analysis & Research: accounts receivable turnover

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Frequently Asked Questions

What is the formula for accounts payable turnover?

The basic formula for measuring payable turnover is total purchases or costs of goods sold in a given period, divided by the average balance in accounts payable during that time.

What does Accounts Receivable Turnover indicate?

Accounts receivable turnover is the rate of collection. It measures the quality of accounts receivable since it indicates velocity of collection. It is used to evaluate the efficiency of a company’s credit management. Where the rate is high, it means that accounts receivable is being properly managed.

How does Accounts Receivable Turnover ratio affect a company?

A high accounts receivable turnover ratio means that you have a strong credit collection policy and do well collecting cash quickly from accounts. High accounts turnover is important for companies in generating cash flow to keep up with short-term capital requirements such as current liabilities, expenses and investment in growth.

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