![]() Investopedia does not include all offers available in the marketplace. Common liquidity ratios include the following: The current ratio measures a companys ability to pay off short-term liabilities with current assets: Current ratio = Current assets / Current liabilities. We can interpret the ratio to mean that Company A collected its receivables 11.76 times on average that year. A high asset turnover ratio indicates a company that is exceptionally effective at extracting a high level of revenue from a relatively low number of assets. Overall turnover is a synonym for a company's total revenues. ![]() The accounts receivable turnover ratio, also known as the debtor's turnover ratio, is an efficiency ratio that measures how efficiently a company is collecting revenue - and by extension, how efficiently it is using its assets. Understanding Receivables Turnover Ratios, Formula and Calculation of the Receivables Turnover Ratio, Usefulness of the Accounts Receivables Turnover Ratio, Limitations of the Receivables Turnover Ratio, ARTR=Accountsreceivableturnoverratio. It is of particular importance in retail. Dividing that average number by 365 yields the accounts payable turnover ratio. ) However, it is important to understand that factors influencing the ratio such as inconsistent accounts receivable balances may accidently impact the calculation of the ratio. The asset turnover ratio uses the value of a company's assets in the denominator of the formula. What Is the Accounts Receivables Turnover Ratio? The key difference between Revenue vs. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. ![]() When evaluating an externally-calculated ratio, ensure you understand how the ratio was calculated. ![]()
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