How to calculate the turnover of accounts receivable？

The turnover of accounts receivable is a financial ratio that measures how quickly a company collects payments from its customers. It is calculated by dividing the total credit sales by the average accounts receivable balance during a period of time. Here are the steps to calculate the turnover of accounts receivable:

1. Determine the total credit sales for the period: This includes all sales made on credit, not including cash sales.

2. Calculate the average accounts receivable balance: Add the beginning and ending accounts receivable balances for the period and divide by two. This gives you the average accounts receivable balance for the period.

3. Divide the total credit sales by the average accounts receivable balance: This gives you the turnover of accounts receivable for the period.

Formula: Turnover of Accounts Receivable = Total Credit Sales / Average Accounts Receivable Balance

For example, if a company had $1,000,000 in credit sales and an average accounts receivable balance of $200,000 for the year, the turnover of accounts receivable would be:

Turnover of Accounts Receivable = $1,000,000 / $200,000 = 5

This means that the company collects payments from its customers five times per year on average.