What is the use of accounts receivable turnover rate? Generally speaking, the higher the turnover rate of accounts receivable, the shorter the average collection period, which means the faster the collection of accounts receivable. Otherwise, the working capital of the enterprise will be too sluggish in the accounts receivable, which will affect the normal capital turnover.
The factors that affect the correct calculation of this index are: seasonal enterprises can't reflect the actual situation when using this index; Widely used installment settlement; A large number of cash settlement sales; At the end of the year, a large number of sales or sales fell sharply. These factors will have a great influence on the calculation results.
External users of financial statements can compare the calculated indicators with previous indicators of enterprises, industry average or other indicators of similar enterprises to judge the level of indicators.
The turnover rate of accounts receivable is usually 7.8, with an excellent value of 24.3 and an excellent value of 15.2. The average construction industry is 4.2, real estate industry is 3.8, retail and wholesale industry is 8.9, accommodation and catering industry is 8.3, and light industry is 6.0. Accounts receivable is an important part of enterprise liquidity, and whether it can be recovered in time directly affects the liquidity of enterprise funds and the smooth reproduction process.
For enterprises, timely recovery can not only be recovered, but also can be said that Lang's enterprise has a good credit status and is not prone to bad debt losses. It is generally believed that the higher the turnover rate, the better. The more turnover times of accounts receivable, the less days are needed for each turnover, which shows that the enterprise has fast repayment speed, less bad debt loss and strong solvency.
Expand knowledge as follows:
Accounts receivable refers to the money that an enterprise expects to recover from the buyer within one year or more of its business cycle because of selling goods or providing services on credit, including the price that should be charged to the buyer, as well as the packaging fees and transportation fees paid by the buyer.
Because accounts receivable are generated by credit sales, the recognition of accounts receivable is closely related to the recognition of income. In general, accounts receivable should be recognized at the same time as income. On the one hand, accounts receivable can expand sales, reduce inventory and accelerate capital turnover. At the same time, enterprises can also raise funds through pledge, sale or securitization of accounts receivable.
On the other hand, accounts receivable have the risk of bad debts, and bad debts refer to the money that enterprises cannot recover. Some enterprises will also inflate the accounts receivable and sales revenue on the books, exaggerating the operating results of enterprises to some extent. Some enterprises will miss accounts receivable in order to reduce taxes and fees.