The accounts receivable turnover ratio is computed by dividing
A) total sales by average net accounts receivable.
B) net credit sales by average net accounts receivable.
C) total sales by ending net accounts receivable.
D) net credit sales by ending net accounts receivable.

Question

Quizplus · Accepted Answer

The accounts receivable turnover ratio measures how many times a company's accounts receivable are collected and paid off over a period of time. The formula for calculating the ratio is net credit sales divided by average net accounts receivable. This means that answer choice B is the correct formula for calculating the ratio. Answer choices A, C, and D are incorrect because they either use total sales instead of net credit sales or use ending net accounts receivable instead of average net accounts receivable.

The Accounts Receivable Turnover Ratio Is Computed by Dividing