# Account receivable

Asked Mar 10, 2007, 06:32 AM — 1 Answer
I have to calculate account receivable ratio for two years

Sales revenue: 2.686585
Account receivables : (2004) 291277 (2003) 271766

Having in mind that 60% of sales was on credit.
I had try but the result is not correct

 okunyah Posts: 2, Reputation: 1 New Member #2 Apr 2, 2007, 06:11 PM
Hi Zulay!
This is the formula for calculating the ratio.
Accounts Receivable Turnover Ratio = annual credit sales / average accounts receivable.

Lets first find your annual credit sales which you say is 60%
=0.60*2,686,585=1,611,951.00 this is your annual credit sales.

Two, lets now get the average accounts receivable = 291,277 + 271,766=563,043.00/2
=281,521.50
Annual credit sales=1,611,951.00
Average accounts receivable=281,521.50
Accounts receivable turnover ratio = 1,611,951.00 /281,521.50 =5.7

A high accounts receivable turnover ratio indicates a tight credit policy.

A low or declining accounts receivable turnover ratio indicates a collection problem, part of which may be due to bad debts.

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