Tuesday, January 3, 2017

Days Receivables Outstanding

Another way to look at accounts receivable turnover is in days:

Days Receivables Outstanding=                       365             
                                                        accounts receivable turnover

This ratio expresses the average length of time in number of days between sales and the cash collection of receivables.  The average number of days that receivables are outstanding can seem like a more intuitive measure than turnover expressed in number of times per year.  In this case, a lower value (or fewer days) is favorable because it represents more rapid turnover.

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