Receivables Turnover Ratio Calculator: Measure Your Business Efficiency
Calculate how many times you collect your average receivables each year. Divide sales revenue by average accounts receivable, then compare the result with your industry’s healthy range of 6-10 turns (Investopedia, https://www.investopedia.com/terms/r/receivableturnoverratio.asp). The higher the ratio, the faster cash comes in. Use the steps below and the FAQ for quick guidance.
Receivables Turnover Ratio Calculator
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How to use the tool
Enter Sales Revenue. Example 1: $900,000. Example 2: $2,250,000.
Enter Average Accounts Receivable. Example 1: $100,000. Example 2: $500,000.
Press “Calculate”. Your receivables turnover ratio appears instantly.
Read the result. Higher ratios mean faster collection and stronger liquidity.
Example 1: $$ rac{900{,}000}{100{,}000}=9.0$$ — you collect receivables nine times per year.
Example 2: $$ rac{2{,}250{,}000}{500{,}000}=4.5$$ — collections cycle about every 81 days (365 ÷ 4.5).
Quick-Facts
Healthy manufacturing ratio: 6-10 turns per year (Investopedia, https://www.investopedia.com/terms/r/receivableturnoverratio.asp).
Average Collection Period = 365 ÷ turnover (Corporate Finance Institute, https://corporatefinanceinstitute.com).
Formula uses net credit sales under GAAP ASC 606 (FASB, 2014).
Ratios below 5 flag credit-control risk (Deloitte 2023 Working Capital Survey).
FAQ
What is the receivables turnover ratio?
The ratio shows how many times you convert credit sales into cash during a period, reflecting collection efficiency (Investopedia, https://www.investopedia.com/terms/r/receivableturnoverratio.asp).
How does the calculator work?
It divides your sales revenue by average accounts receivable, then rounds the result to two decimals for quick comparison.
Which inputs are required?
You only need total period sales revenue and the average of opening and closing receivable balances (FASB, 2014).
What is a good turnover ratio?
Manufacturing businesses aim for 6-10; retail often exceeds 12 due to faster cash cycles (Investopedia, https://www.investopedia.com/terms/r/receivableturnoverratio.asp).
How can I improve a low ratio?
Shorten payment terms, invoice promptly, and enforce credit checks; Deloitte found stricter terms raise turnover by 15 % (Deloitte 2023 Working Capital Survey).
How do I convert the ratio into days?
Divide 365 by your ratio to estimate average collection days—e.g., 365 ÷ 9 = 41 days (Corporate Finance Institute, https://corporatefinanceinstitute.com).
Does industry affect benchmarks?
Yes; utilities average 5-7 while groceries exceed 20 due to daily cash sales (Moody’s Sector Medians 2022).
Can seasonal firms rely on an annual ratio?
Create monthly or quarterly ratios to spot seasonal spikes; the SEC recommends interim analysis for accuracy (SEC Staff Accounting Bulletin 104).
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