Receivables turnover calculator
- Formula
- Credit sales ÷ Average AR
Receivables turnover = Credit sales ÷ Average AR365 for a year.
Receivables turnover
10.00×
How it’s worked out
- 1Average receivables($540,000 + $660,000) ÷ 2$600,000
- 2Credit sales ÷ average AR$6,000,000 ÷ $600,00010.00×
- 3Average collection period365 ÷ 10.0036.5 days
Runs in your browser; nothing you type is sent anywhere. Amounts in US dollars.
Worked on a real month of books
Northwind Traders, Inc., September 2026 (accrual basis, USD), the month the free course is taught on. Opening receivables were zero in the company's first month. Every figure is read off the course's posted ledger, not typed.
- 1Average receivables($0 + $8,000) ÷ 2$4,000
- 2Credit sales ÷ average AR$22,000 ÷ $4,0005.50×
See the statements these come from in the course.
How to read it
Receivables turnover counts how many times the average receivables balance was collected during the period.
Higher is better: invoices are turning into cash faster. A falling turnover with steady sales means collections are slipping.
Common mistakes
- Including cash sales in the numerator.
- Using gross receivables without netting the allowance for credit losses.
Questions
- How does receivables turnover relate to DSO?
- Days in the period divided by the turnover gives the average collection period, which is closely related to DSO.
- Should cash sales be included?
- Only credit sales. Cash sales never pass through receivables.
Read it with
The metrics read alongside this one, and the terms it is confused with.
- DSO calculatorDSO is a liquidity and working-capital metric, calculated as (Ending AR ÷ Credit sales for the period) × Days in the period.Calculator
- Collection effectiveness index calculatorCEI is a liquidity and working-capital metric, calculated as (Opening AR + Credit sales − Closing total AR) ÷ (Opening AR + Credit sales − Closing current AR).Calculator
- Inventory turnover calculatorInventory turnover is a liquidity and working-capital metric, calculated as COGS ÷ Average inventory.Calculator
- Receivables turnoverReceivables turnover is a liquidity and working-capital metric, calculated as Credit sales ÷ Average AR.Term
The formula is the one the glossary states, and the arithmetic is unit-tested. A ratio with nothing to divide by shows a dash — undefined is not zero. General information, not financial advice.