See how many times a generic company’s receivables cycled through in a year.
$500,000
$100,000
($90,000 + $110,000) ÷ 2
5.0 times
divides net sales by average accounts receivable: how many times, in a year, the company collected and re-extended credit to its customers.
A higher number means faster collection. Compared against a competitor or the company’s own history, a falling turnover is often the first sign that credit policy has gotten too loose.