Question

What does Trade Receivables Turnover Ratio indicate?

Answer 1

The Trade Receivables Turnover Ratio measures how efficiently a company collects payments from clients. It counts the number of times a company’s trade receivables are turned over (or collected) during a given period. A higher ratio implies that the company is collecting receivables promptly, implying improved liquidity and credit management. A lower percentage may suggest collection troubles or extended credit terms, which can have an impact on cash flow.