what does a higher accounts receivable turnover ratio indicate?
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A high receivables turnover ratio can indicate that a company's collection of accounts receivable is efficient and that the company has a high proportion of quality customers that pay their debts quickly. A high receivables turnover ratio might also indicate that a company operates on a cash basis.
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Accounts receivable has a negative balance when it has more credits than debits, because it would be the opposite of its normal balance.
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Phrased simply, an accounts receivable turnover increase means a company is more effectively processing credit. An accounts receivable turnover decrease means a company is seeing more delinquent clients. It is quantified by the accounts receivable turnover rate formula.
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Generally speaking, a high P/E ratio indicates that investors expect higher earnings. However, a stock with a high P/E ratio is not necessarily a better investment than one with a lower P/E ratio, as a high P/E ratio can indicate that the stock is being overvalued.
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16-12 The most important factors affecting the sample size in confirmations of accounts receivable are:  Tolerable misstatement  Inherent risk (relative size of total accounts receivable, number of accounts, prior year results, and expected misstatements)  Control risk  Achieved detection risk from other ...
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The accounts receivable turnover in days shows the average number of days that it takes a customer to pay the company for sales on credit.
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A ratio of 1 would imply that creditors and investors are on equal footing in the company's assets. A higher debt-equity ratio indicates a levered firm.
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Accounts receivable turnover, or A/R turnover, is calculated by dividing a firm's sales by its accounts receivable. It is a measure of how efficiently a company is able to collect on the credit it extends to customers.
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Accounts receivable and cash equivalents have two different risk profiles. Accounts receivable are loans to your customer; there is always a risk that your customer won't pay. Cash equivalents are high in liquidity; there is little to no risk associated with cash equivalents.
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A high receivables turnover ratio can indicate that a company's collection of accounts receivable is efficient and that the company has a high proportion of quality customers that pay their debts quickly. ... A high ratio can also suggest that a company is conservative when it comes to extending credit to its customers.
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Average collection period = # of days in the year (365) / Accounts receivable turnover (7)= 52 days. Written promise (formal instrument or promissary note) for amount to be received. Also called trade receivables.
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Key Takeaways. The fixed asset turnover ratio is an efficiency ratio that measures how well a company uses its fixed assets to generate sales. ... Investors use the ratio to determine their return on investment (ROI), and creditors use it to assess how well a company can repay loans used to purchase equipment.
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Since the service was performed at the same time as the cash was received, the revenue account Service Revenues is credited, thus increasing its account balance. Accounts Receivable is an asset account and is increased with a debit; Service Revenues is increased with a credit.
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Accounts receivable are monies owed to a company by customers for goods or services provided, but not yet collected from them. If you have a high accounts receivables balance, it means that you have a large sum of money that is owed to you by your customers.
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Accounts receivable turnover ratio is calculated by dividing your net credit sales by your average accounts receivable. The ratio is used to measure how effective a company is at extending credits and collecting debts.
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That means the smaller the reserve ratio is, the larger the increase it brings to the money supply, because more of the customers' deposits get loaned out by the bank. For example, When the reserve ratio is 0.25, that means the money multiplier is 4. When the reserve ratio is 0.2, that means the money multiplier is 5.
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The accounts receivable turnover is calculated by: Dividing net sales by average accounts receivable.