A financial ratio that relates the cost of goods sold to accounts receivable. This ratio is calculated by dividing the cost of sales by the amount of short-term credit sales at a given point in time or for a specific period of time. This ratio is a measure of the liquidity of accounts receivable assets. The higher the turnover is, the more liquid the assets are. However, a too high turnover ratio may indicate an overly tight credit policy, restricting inventory turnover, and impacting the organic growth of a company.
The accounts receivable turnover ratio is also known as a sales-to-receivables ratio.
