Number of days' sales in receivables
From Wikicpa
The Number of days' sales in receivables is often calculated as a simple turnover ratio by dividing sales by receivables. A more significant comparison is obtained by using the following formula:
[edit]
Formula
[edit]
Results
The indicated computation gives a rough estimate of the average length of time accounts are outstanding. Comparision with the credit terms under which sales are made gives a measure for testing efficiency in handling the receivables.
