The Receivables Turnover Ratio Formula is a key measure of a business’ ability to collect on its outstanding receivables. It provides insight into the rate at which a company is able to convert its accounts receivable—debtors and other short-term loans that customers owe it—into cash. This ratio also provides an indication of the credit quality of its customers, as unpaid invoices and defaults can reduce overall performance. To calculate the Receivables Turnover Ratio Formula, divide a company’s net credit sales over a period of time by its average accounts receivable balance during that same period. The result shows how quickly a business can convert its credit sales into cash payments from its customers. A higher number indicates quicker turnover of receivables and is generally more desirable.