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# Accounts Receivable Turnover Ratio Calculator

## What is Accounts Receivable Turnover Ratio Calculator

The Accounts Receivable Turnover Ratio Calculator is a tool used in finance to measure how efficiently a company is collecting its accounts receivable, which are the amounts owed by customers.

## What is the Accounts Receivable Turnover Ratio?

The Accounts Receivable Turnover Ratio is a financial metric that shows how many times a companyâ€™s accounts receivable are collected (or “turned over”) during a specific period, typically a year. Itâ€™s an indicator of how well a company is managing the credit it extends to its customers and how quickly it is collecting owed funds

Accounts Receivable Turnover Ratio Formulas

## Accounts Receivable Turnover Ratio Formulas

1. Net Sales Formula:

$\text{Net Sales} = \text{Gross Sales} - \text{Refunds/Returns} - \text{Sales on Credit}$

2. Average Accounts Receivables Formula:

$\text{AAR Formula} = \frac{\text{Beginning Accounts Receivable} + \text{Ending Accounts Receivable}}{2}$

3. Accounts Receivable Turnover Ratio Formula:

$\text{ARTR Formula} = \frac{\text{Net Credit Sales}}{\text{Average Accounts Receivable}}$

4. Accounts Receivable Turnover in Days Formula:

$\text{ART in Days} = \frac{365}{\text{Receivable Turnover Ratio}}$

### Example Calculation:

Assume a company has the following data:

• Gross Sales: $1,000,000 • Refunds/Returns:$50,000
• Sales on Credit: $450,000 • Beginning Accounts Receivable:$100,000
• Ending Accounts Receivable: $200,000 • Net Credit Sales:$500,000

The Net Sales is calculated as:

$\text{Net Sales} = 1,000,000 - 50,000 - 450,000 = 500,000$

The Average Accounts Receivable is calculated as:

$\text{Average Accounts Receivable} = \frac{100,000 + 200,000}{2} = 150,000$

The Accounts Receivable Turnover Ratio is calculated as:

$\text{Accounts Receivable Turnover Ratio} = \frac{500,000}{150,000} \approx 3.33$

The Receivable Turnover in Days is calculated as:

$\text{Receivable Turnover in Days} = \frac{365}{3.33} \approx 109.61 \text{ days}$

This indicates that, on average, it takes approximately 110 days to collect the receivables.

## Factors Effecting Accounts Receivable Turnover Ratio

• Net Sales
• Average Accounts Receivables
• Accounts Receivable Turnover
• Accounts Receivable Turnover in Days

## Use of the Calculator

The calculator simplifies the process of calculating this ratio by automating the formula. Users just need to input the required financial figures (Net Credit Sales and Average Accounts Receivable), and the calculator will compute the ratio for them.

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