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Accounts receivable turnover is a financial ratio that measures how many times a company collects its average accounts receivable balance in a specific period. It indicates the efficiency of receivables management.
Introduction: The Accounts Receivable Turnover (ART) ratio is a crucial financial metric that evaluates how efficiently a company collects receivables from its customers. It measures the number of times a business can turn its accounts receivable into cash during a specific period, typically a fiscal year.
Importance: A high ART ratio indicates that a company is effective in collecting its debts and converting credit sales into cash swiftly, which is vital for maintaining healthy cash flow. Conversely, a low ART ratio might suggest issues with credit policies or problems with customer payments, potentially leading to cash flow constraints.
Calculation:
Strategies for Improvement:
Accounts Payable are the amounts a company owes to its suppliers or vendors for goods and services purchased on credit. These are short-term liabilities.
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Accounts Payable Turnover: Accounts payable turnover is a financial ratio that measures how many times a company pays its average accounts payable balance in a specific period. It assesses the efficiency of managing trade credit.
Learn moreAccounts Receivable: Accounts receivable are amounts due to a company from its customers for goods or services sold on credit. These represent short-term assets.
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