Answer:
The answer is A.
Explanation:
Accounts Receivable turnover is calculated as:
Total amount of credit sales ÷ Average balance of accounts receivable.
Accounts receivable turnover is used to evaluate the effectiveness and efficiency of a business or firm in collecting its accounts receivable or the money being owed.
A high turnover ratio shows that the company has good customers that are not defaulting or has a strict accounts receivable policy while a low turnover ratio shows that its debtors are not paying as expected.
Answer: The account receivable turnover ratio is calculated by dividing the amount of credit sales by the average balance of account receivable.
Explanation:
The accounts receivable turnover ratio is also referred to as the debtor’s turnover ratio. It is an efficiency ratio that shows how efficiently a firm is collecting revenue and also how efficiently it uses its assets. The accounts receivable turnover ratio shows the number of times within a period that a firm collects the average of its account receivable.
The accounts receivable turnover ratio formula is:
Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable
where:
Net credit sales are sales where cash is collected at a future date. The formula for net credit sales is sales on credit – Sales returns – Sales allowances. The average accounts receivable is the addition of starting and ending accounts receivable over a period of time divided by 2.
