About the Receivables Turnover Ratio
The receivables turnover ratio measures how effectively a company extends credit to vendors and how well it collects these debts. The higher the ratio the better!
Formula: Net Credit Sales ÷ Average Accounts Receivable
Net credit sales is the total amount of sales a complete completed on credit, i.e not for cash. This is not always listed on the income statement and you may just need to net sales as your starting fiigure.
Average accounts receivable is the average AR of a company for 2 years. For example, if a company has $5 million in AR during 2013 and $10 million during 2014, the average AR would be (5+10) ÷ 2 Years = $7.5 Million.