Accounts receivable turnover, also known as debtor’s turnover, is a critical financial ratio used to measure a company’s effectiveness in extending credit to customers and collecting payments in a timely manner. It’s formula is calculated by dividing net credit sales by the average accounts receivable balance. This metric measures how frequently a company collects its receivables over a period of time and signals their effectiveness in managing orders and payment collection process. A high accounts receivable turnover rate typically indicates a healthy business because it shows that customers pay their bills promptly and that cash flow is steady.