Since this potential investor in Denzel Co. would like to measure how frequently Denzel converts its account receivables into cash, the investor takes Denzel's net sales divided by average accounts receivable to determine this information, known as the accounts receivable turnover ratio.
In Financial accounting, there are four (4) basic financial statements and these include the following:
An income statement can be defined as a type of financial statement which is typically used by an entrepreneur (individual) or business firm to record the amount of money (revenues) that are entering or flowing into the business.
In Business management, all accounts receivable would appear on a balance sheet and they can be calculated by using this mathematical expression;
Accounts receivable = Net sales/Average number of accounts
Additionally, the receivables turnover of a business organization can be calculated by using this formula:
Receivables turnover = Credit sales/Accounts receivable
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