Receivables turnover measures how quickly a company collects cash from its credit customers. It divides trailing twelve-month revenue by average accounts receivable. A higher ratio means the company is collecting more efficiently. A declining ratio may indicate loosening credit terms, deteriorating customer quality, or collection problems.
Receivables Turnover = Revenue (TTM) / Average Accounts Receivable
GeminIQ uses TTM net revenue divided by the average of current and year-ago receivables from the balance sheet, both sourced from SEC filings.
A: It depends on the company's credit terms. A company offering net-30 terms should have receivables turnover around 12 (collecting monthly). Net-60 terms imply turnover around 6. Ratios significantly below what the credit terms suggest may indicate collection problems.
A: Days Sales Outstanding (DSO) is 365 divided by receivables turnover. It tells you the average number of days between a sale and when cash is collected. Both metrics tell the same story.
A: Some platforms use gross receivables, others use net receivables (after allowance for doubtful accounts). GeminIQ uses Accounts Receivable Net as reported in the filing.