A high accounts receivable turnover ratio indicates that a firm is efficient in converting receivables to cash.
What is the receivables turnover ratio?
Receivables turnover ratio is an example of an activity ratio which measures how efficiently a firm carries out its daily activities. Receivables turnover ratio is the ratio of revenue to average reciveables.
Receivables turnover ratio = Revenue / average receivables
The faster it is for a firm to collect its receivables, the more efficient the firm is.