Accounting: what is turnover???

VectorWega
Sun, 02 Nov 2008 01:31:26 +0000

It means that it takes the customers an avg of 1 month to pay the amount they owe to the company. Obviously, the longer it takes the customer to pay (the lower the ratio), the worst off the company is (because if paid in cash, the company could invest that money and collect interest on it).

When u look at the ratio, it is better to have higher Net Sales and better to have lower receivables on hand (company would rather have the cash on hand ASAP).