Receivables turnover
A common convention is net credit sales divided by average trade receivables. Specify the period and the balance used, and use credit rather than total sales where available. The related receivables collection period can be calculated as days in the period divided by turnover under consistent assumptions. Seasonality and a year-end balance may make the measure unrepresentative.
Worked example
Net credit sales are $1 million and average trade receivables are $200,000. Receivables turnover is 5 times per year, equivalent to 365 ÷ 5 = 73 days under a 365-day convention.
Common mistake
Calling 5 times a five-day collection period or using total sales without recognising that cash sales distort the ratio.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |