![]() When analyzing financial ratios of several different but similar companies, a company can better understand whether it is an industry-leader or whether it is falling behind. How it is performing compared to its competitors.When analyzing financial ratios of a single company over time, that company can better understand the trajectory of its accounts receivable turnover. The receivable turnover ratio or accounts receivable turnover ratio is among of activity ratios used to assess the ability of the business to convert. Also known as the debtors turnover ratio, the accounts receivable turnover ratio measures how many times in a given time period (usually a month, quarter, or. Slower turnover of receivables may eventually lead to clients becoming insolvent and unable to pay. Accounts receivable turnover ratio: Net Credit Sales: 200,000 10,000 190,000. If a company's accounts receivable turnover ratio is low, this may be an indicator that a company is not reviewing the creditworthiness of its clients enough. How sufficiently a company is evaluating the credit of clients.A company can project what cash it will have on hand in the future when better understanding how quickly it will convert receivable balances to cash. ![]() ![]() When it might be able to make large capital investments.Some lenders may use accounts receivable as collateral with strong historical accounts receivable activity, a company may have greater opportunities to borrow funds. What collateral opportunities a company may have.As a company processes receivable balances faster, it gets its hand on capital faster. The RTR (Receivable Turnover Ratio) in days represents the average number of days of time span in which a party may pay the credit sales to the company. How well a company is collecting credit sales.
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