The receivables turnover ratio is an accounting measure used to quantify a company's effectiveness in collecting its accounts receivable, or the money owed by customers or clients. This ratio measures how well a company uses and manages the credit it extends to customers and how quickly that short-term debt is collected or is paid. A firm that is efficient at collecting on its payments due will have a higher accounts receivable turnover ratio.
It is useful to compare a firm's ratio with that of its peers in the same industry to gauge whether it is on par with its competitors.
Companies that maintain accounts receivables are indirectly extending interest-free loans to their clients since accounts receivable is money owed without interest. If a company generates a sale to a client, it could extend terms of 30 or 60 days, meaning the client has 30 to 60 days to pay for the product.
The receivables turnover ratio measures the efficiency with which a company collects on its receivables or the credit it extends to customers. The ratio also measures how many times a company's receivables are converted to cash in a period. The receivables turnover ratio is calculated on an annual, quarterly, or monthly basis.

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