This is net credit sales for the year divided by year end accounts receivable. The accounts receivable turnover ratio is net credit sales divided by average accounts receivable. Whenever we relate an income statement amount such as net credit sales to a balance sheet amount such as accounts receivable, we need to use the average balance of the balance sheet amount, not the beginning or ending balance.
The accounts receivable turnover ratio is net credit sales divided by average accounts receivable. Average accounts receivable is the average of the beginning and ending balances, which is $360,000. Net credit sales is $3,600,000, so the accounts receivable turnover ratio is $3,600,000 / $360,000, which equals 10. Accounts receivable "turns over" 10 times during the year.
This is net credit sales for the year divided by the beginning of the year accounts receivable balance. The accounts receivable turnover ratio is net credit sales divided by average accounts receivable. Whenever we relate an income statement amount such as net credit sales to a balance sheet amount such as accounts receivable, we need to use the average balance of the balance sheet amount, not the beginning or ending balance.
This is average accounts receivable divided by net credit sales for the year. The accounts receivable turnover ratio is net credit sales divided by average accounts receivable.
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