How efficiently a company collects cash from credit sales. Higher is better. Declining receivables turnover may signal customers are taking longer to pay, which could foreshadow bad debt problems.
Formula
Description
Measures how efficiently a company collects cash from credit sales. Higher turnover means faster collection, which reduces the risk of bad debts and improves cash flow. It is the inverse of DSO expressed as a ratio.
Interpretation
Above 8 is generally efficient. Declining receivables turnover may signal that customers are taking longer to pay, which could foreshadow bad debt increases. Compare to industry norms, as B2B companies naturally have lower turnover.
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