One of the activity ratios in business is the receivables turnover ratio or rate. This ratio measures the frequency of collecting the entire balance of accounts receivable during a standard accounting year. The ideal turns rate is twelve with a higher value indicating an aggressive collection process. A lower value is a warning about accounts receivable management.
Receivables Turnover Ratio
The receivables turnover ratio or rate is the frequency the receivables are paid within a year. A rate of 12 or higher indicates good performance, anything greater than a 15:1 ratio is considered outstanding.