Definition
Receivables turnover measures collection efficiency. Higher turnover means faster collection. Days Sales Outstanding (DSO) converts to days. Increasing DSO may indicate credit quality problems or aggressive revenue recognition.
Formula
Receivables Turnover = Revenue / Average Accounts Receivable; DSO = 365 / Turnover
Example
With $365M revenue and $50M average receivables, turnover is 7.3x, or 50 days DSO. The company collects payment in about 50 days on average.
FAQ
What is Receivables Turnover?
How quickly a company collects payment from customers.
How do you calculate Receivables Turnover?
A common formula for Receivables Turnover is: Receivables Turnover = Revenue / Average Accounts Receivable; DSO = 365 / Turnover
Why is Receivables Turnover important?
Receivables Turnover helps investors evaluate efficiency and make more informed decisions.