Intermediate Accounting 14th Edition

Published by Wiley
ISBN 10: 0470587237
ISBN 13: 978-0-47058-723-2

Chapter 7 - Cash and Receivables - Questions - Page 405: 21

Answer

Accounts receivable turnover ratio is calculated by dividing the net sales by receivables outstanding during the year. It is used to evaluate the level of liquidity affiliated with a certain class of receivables. It evaluates the number of times receivables are collected during the period on average.

Work Step by Step

Accounts receivable turnover ratio also avails some indication of the quality of the receivables and success level of collection by the company.
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