The accounts receivable turnover ratio captures the speed of cash collections from credit customers and is calculated as follows:
A)average accounts receivable divided by sales revenue.
B)sales revenue divided by average accounts receivable.
C)sales revenue plus average accounts receivable.
D)sales revenue minus average accounts receivable.
E)sales revenue times average accounts receivable.

Question

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The accounts receivable turnover ratio is calculated by dividing sales revenue by the average accounts receivable balance for the period. This gives an indication of how quickly a company is able to collect cash from its credit customers. A higher turnover ratio is usually preferred as it indicates that the company is collecting its receivables more quickly.

The Accounts Receivable Turnover Ratio Captures the Speed of Cash