Receivables Turnover Calculator Formula

Understand the math behind the receivables turnover calculator. Each variable explained with a worked example.

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Formulas Used

Receivables Turnover

ar_turnover = (ar_start + ar_end) > 0 ? net_credit_sales / ((ar_start + ar_end) / 2) : 0

Average Collection Period

avg_collection_days = (ar_start + ar_end) > 0 ? 365 / (net_credit_sales / ((ar_start + ar_end) / 2)) : 0

Average Accounts Receivable

avg_ar = (ar_start + ar_end) / 2

Variables

VariableDescriptionDefault
net_credit_salesNet Credit Sales(USD)800000
ar_startAccounts Receivable (Beginning)(USD)60000
ar_endAccounts Receivable (End)(USD)100000

How It Works

How to Calculate Receivables Turnover

Formula

Receivables Turnover = Net Credit Sales / Average Accounts Receivable Average Collection Period = 365 / Receivables Turnover

This ratio measures how many times per year a company collects its average receivables balance. A higher number indicates faster collection. The average collection period converts the ratio into days, giving you a concrete sense of how long customers take to pay their invoices.

Worked Example

A company had $800,000 in net credit sales. Accounts receivable were $60,000 at the start and $100,000 at the end.

net_credit_sales = 800000ar_start = 60000ar_end = 100000
  1. 01Average AR = ($60,000 + $100,000) / 2 = $80,000
  2. 02Receivables Turnover = $800,000 / $80,000 = 10.0
  3. 03Average Collection Period = 365 / 10 = 36.5 days

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