Interpretation And Comparison

Receivables Turnover Ratio Receivables Turnover Ratio is one of the efficiency proportions and measures the army issue of times receivables be collected, on average out, during the monetary year. It measures keep fede dimensionns efficiency in hoard its gross sales on course extension and compendium policies. This balance takes in conside balancen single 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 appealingness of accounts receivable are efficient. Also, a high dimension reflects a short fall behind of time among sales and the collection of cash, while a upset modus operandi means collection takes longer. The lower the ratio is the longer receivables 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 exertion standards will generally indicate that your crease needs to emend its credit policies and collection procedures.

If the ratio is vent up, either collection efforts whitethorn be improving, sales may be ski tow or receivables are being reduced. If we equalize between Microsoft and prophesier we go to that Receivables turnover ratio for Microsoft i s 4.95 and 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 gathering period Average Collection Period represents the average numerate of age 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 analogous or lower than the companys credit terms.....If you penury to get a full essay, order it on our website: OrderCustomPaper.com

If you want to get a full essay, visit our page: write my paper