Final answer:
The formula used to calculate the accounts receivable turnover is Average Accounts Receivable ÷ Sales. This formula helps determine how quickly a company collects its accounts receivable. Option b
Step-by-step explanation:
The formula used to calculate the accounts receivable turnover is option b. Average Accounts Receivable ÷ Sales.
To calculate the accounts receivable turnover, we divide the average accounts receivable by the total sales. The average accounts receivable is the average amount of money that the company is owed by its customers for a given period. The total sales is the sum of all the sales made by the company during the same period.
Dividing these two values gives us the accounts receivable turnover, which indicates how quickly the company collects its accounts receivable.
For example, if a company has an average accounts receivable of $10,000 and total sales of $100,000, the accounts receivable turnover would be 0.1 (10,000 ÷ 100,000). This means that the company collects its accounts receivable 0.1 times during the given period. A higher accounts receivable turnover is generally preferable, as it indicates that the company is collecting its accounts receivable more quickly. Option b