Accounts receivable turnover
factor.formula
Accounts receivable turnover ratio calculation formula:
This formula calculates the accounts receivable turnover ratio, using the trailing twelve months' operating income (TTM) as the numerator and the average of the ending accounts receivable and ending notes receivable as the denominator. It should be noted that using the average value can better represent the level of accounts receivable over the entire period.
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Refers to the total operating income achieved by an enterprise in the last 12 consecutive months. It is an important indicator of the enterprise's business scale and sales capacity. Using TTM data can reflect the company's recent operating conditions and reduce the impact of seasonal fluctuations.
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Refers to the balance of accounts receivable that has not been collected by the company at the end of the accounting period (for example, the end of the year or the end of the quarter). This part of the amount represents the company's debt to customers due to the sale of goods or provision of services.
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Refers to the balance of unexpired notes receivable held by an enterprise at the end of an accounting period. Notes receivable are usually a form of payment from customers and represent the company's debt to customers.
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The average of the ending accounts receivable and the ending notes receivable more accurately reflects the overall level of accounts receivable over the period. Using the average, rather than just the ending balance, reduces bias due to short-term fluctuations.
factor.explanation
The higher the accounts receivable turnover rate, the stronger the company's ability to convert accounts receivable into cash, and the faster the sales revenue is converted into cash. A higher turnover rate is generally considered a good indicator of operating capacity, indicating that the company can collect the payment in a timely manner after selling goods or providing services, thereby improving the efficiency of capital use. This indicator can help investors and analysts evaluate the company's operating efficiency, financial risk and liquidity status. However, a high accounts receivable turnover rate may also mean that the company's credit policy is too strict, and it may lose some customers and sales opportunities. Therefore, when analyzing this indicator, it is necessary to conduct a comprehensive assessment based on the industry average and the specific situation of the company.