Is this understanding correct about receivables turnover?

[sachin_patel]

Example,

Sales is $50 and avg receivable is $10, so receivable turnover is 5.

Meaning,

For every 5 dollars of revenue, company has 1 dollar goes to receivables. The remaining 4 dollars are collected during the year.

[NANA_Hachiko]

@sachin\_patel

Example,

Sales is $50 and avg receivable is $10, so receivable turnover is 5.

Meaning,

For every 5 dollars of revenue, company has 1 dollar goes to receivables. The remaining 4 dollars are collected during the year.

Your formula is correct, but i don’t know if you can interpret the ratio that way…

Higher ratio only means the company collects its receivables quickly, relatively speaking.