Accounts receivable turnover
factor.formula
Accounts receivable turnover rate calculation formula:
The meaning of each parameter in the formula is as follows:
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Refers to the total operating income of the most recent 12 months (rolling). This indicator usually uses rolling 12-month data to reduce the impact of seasonal factors and more comprehensively reflect the company's revenue. Operating income is the core source of income for a company's operating activities and is also an important basis for calculating accounts receivable turnover.
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Refers to the amount of money that has not been collected by the company due to the sale of goods or provision of services at the end of the reporting period, including accounts receivable from customers, excluding prepayments. This is an important factor in measuring the sales ability of the company and is also a key denominator factor in the calculation of turnover rate.
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Refers to the legally binding commercial bills (bank acceptance bills or commercial acceptance bills) collected by the company for selling goods or providing services. Notes receivable are also debt certificates that the company can recover in the future. They are also the key denominator factor in the calculation of turnover rate.
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In order to more accurately reflect the average level of accounts receivable during the calculation period, the average of accounts receivable and notes receivable at the end of the period is usually used as the denominator. If the data is available, it is more accurate to use the average of accounts receivable at the beginning and end of the period and notes receivable at the beginning and end of the period. This indicator represents how much accounts receivable and notes the company holds throughout the period.
factor.explanation
Accounts receivable turnover is an important indicator of operating capacity. It reflects the speed at which an enterprise converts accounts receivable into cash, or in other words, the efficiency of the enterprise in collecting sales revenue. A higher accounts receivable turnover rate usually means that the enterprise has a strong accounts receivable management ability and can quickly convert sales into cash, thereby improving the company's capital turnover efficiency and profitability. On the contrary, a lower accounts receivable turnover rate may imply that the company has problems such as poor accounts receivable management, customer arrears, and high bad debt risk. In practical applications, the industry average and the company's historical data should be combined for analysis to more accurately assess the company's operating capacity. In quantitative investment, this indicator can be used as a factor to measure the quality and fundamental health of the company. It should be noted that the accounts receivable turnover rates of different industries vary greatly, so caution should be exercised when making cross-industry comparisons.