Interpretation And Comparison

Receivables Turnover Ratio Receivables Turnover Ratio is one of the efficiency proportions and measures the armed services issue of times receivables are collected, on average out, during the fiscal year. It measures keep ships companys efficiency in pile up its gross sales on course quotation and compendium policies. This balance takes in conside balancen solely the credit sales. Accounts receivable represents the collateral interest free loans that the company is providing to its clients. Therefore, it is very important to bonk how costly these loans are for the company. A high receivables turnover proportion implies either that the company operates on a cash nates or that its extension of credit and accretion of accounts receivable are efficient. Also, a high symmetry reflects a short fall behind of time amid sales and the collection of cash, while a upset depend means collection takes longer. The lower the ratio is the longer receivables are being held a nd the risk to not be collected increases. A low receivables turnover ratio implies that the company should re-assess its credit policies in order to ensure the timely collection of credit sales that is not earning interest for the firm.A ratio that is low by application standards will generally indicate that your crease needs to cleanse its credit policies and collection procedures.

If the ratio is vent up, either collection efforts whitethorn be improving, sales may be procreation or receivables are being reduced. If we equalize between Microsoft and prophesier we visit that Receivables turnover ratio for Microsoft is 4.95 and for Oracle is 5.07. Si! nce Oracles ratio is higher than Microsoft, Oracle is much efficient in collecting its sales on credit and collection policies. Average hookup period Average Collection Period represents the average derive of eld it takes the company to convert receivables into cash. It measures the average number of days that accounts receivable are outstanding. This activity ratio should be the same or lower than the companys credit terms.....If you penury to get a full essay, order it on our website: BestEssayCheap.com

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