Tips on Balance Sheet and Financial Ratios Research

Financial Ratios for Efficiency Measurement

These financial ratios are generally understood as measures of firm and industry efficiency:

1. Accounts Receivables Turnover
Sales/ Accounts Receivable

Related financial ratio: Collection Period or Day’s Receivables
Accounts Receivable Turnover X 365

This ratio measures the number of times that receivables turn over during the year. The higher the turnover of receivables, the shorter the time between sale and cash collection. If a company's Turnover Rate is significantly lower than industry norms, the underlying reason (poor collection methods, high risk customers, low sales) needs to be pinpointed.