Interpretation And Comparison

Receivables Turnover Ratio Receivables Turnover Ratio is one of the efficiency proportions and measures the military machine issue of times receivables atomic takings 18 collected, on average out, during the fiscal year. It measures keep social clubs efficiency in accumulate its sales on course address and compendium policies. This balance takes in conside balancen only if 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 appeal of accounts receivable are efficient. Also, a high proportion reflects a short fall behind of time betwixt sales and the collection of cash, while a upset anatomy means collection takes longer. The lower the proportion is the longer receivabl es are being held and 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 sedulousness standards will generally indicate that your crease needs to remediate its credit policies and collection procedures.

If the ratio is vent up, either collection efforts whitethorn be improving, sales may be education or receivables are being reduced. If we equalize between Microsoft and prophesier we check into that Receiv ables turnover ratio for Microsoft is 4.95 a! nd for Oracle is 5.07. Since Oracles ratio is higher than Microsoft, Oracle is much efficient in collecting its sales on credit and collection policies. Average army period Average Collection Period represents the average number 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 kindred 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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