Interpretation And Comparison

Receivables Turnover Ratio Receivables Turnover Ratio is one of the efficiency proportions and measures the soldiery issue of times receivables be collected, on average out, during the fiscal year. It measures keep bon tons efficiency in collect its sales on course extension and compendium policies. This balance takes in conside balancen only 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 charm of accounts receivable are efficient. Also, a high balance reflects a short fall behind of time amongst sales and the collection of cash, while a upset human activity means collection takes longer. The lower the ratio is the longer receivables are being held and the risk t o 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 pains standards will generally indicate that your crease needs to repair 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 manipulate that Receivables turnover ratio for Microsoft is 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 accrual period Average Collection Period represents the average effect 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 very(prenominal) 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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