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Accounts Receivable Turnover Ratio Calculator

Calculates asset efficiency and Days Sales Outstanding (DSO). Analyzes how effectively a company collects debts.

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Category Financial Ratios

Financial Data

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About

The Accounts Receivable Turnover Ratio is an efficiency ratio that measures how many times a business can turn its accounts receivable into cash during a specific period. A high ratio implies an efficient collection process and high-quality customers, while a low ratio may indicate bad debt or lax credit policies.

This tool goes beyond the raw ratio by calculating the "Days Sales Outstanding" (DSO). While the ratio is abstract, DSO gives a concrete number of days it takes to get paid. For liquidity analysis, knowing your average collection period is vital for managing cash flow gaps.

dso accounting liquidity turnover ratio balance sheet

Formulas

The calculation requires Net Credit Sales and the Average Accounts Receivable for the period.

Ratio = Net Credit SalesARbegin + ARend2
DSO = 365Ratio

Reference Data

Ratio RangeDSO (Approx)Interpretation
12.0 +< 30 daysExcellent. Very efficient collection or cash-only sales.
6.0 − 12.030 − 60 daysStandard. Typical for B2B industries with Net-30/60 terms.
1.0 − 4.090 + daysPoor. Potential cash flow issues; verify credit policies.

Frequently Asked Questions

Using the average (Beginning + Ending / 2) smooths out seasonality. If a business has high sales in December, using only the year-end AR figure might skew the ratio downward.
No. Strictly speaking, you should only input "Net Credit Sales". Including cash sales inflates the ratio artificially because cash sales create no receivables.