The financial statements of Danielle Manufacturing Company report net sales of $600,000 and accounts receivable of $60,000 and $90,000 respectively. Danielle's receivables turnover ratio is 8 times.
Receivable turnover ratio = Turnover / Average account receivables
= $600,000 / [($60000 + $90000) / 2]
= 8 times
What is receivable's turnover ratio?
The efficiency with which a business is able to collect on its receivables or the credit it gives to clients is measured by the receivable's turnover ratio. The ratio also counts the number of times a company's receivables are turned into cash over a specific time period.
What Is a Good Turnover Ratio for Accounts Receivable?
In general, a greater number is preferable. It indicates that your clients are paying on time and that your business is proficient at collecting.
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