The Credit Turnover Ratio is an essential measure of how efficiently a business manages their accounts receivable. It’s calculated by dividing the total amount of invoices outstanding during a given period by the average amount of credit sales for that same period. This calculation helps businesses monitor how quickly customers are paying back their debts and gives insights into how the company’s credit offering is being utilized. A low ratio indicates that customers aren’t taking advantage of the company’s offerings, while a high ratio reveals that the company is overextending itself with its credit policies. By monitoring the Credit Turnover Ratio, businesses can ensure they remain in control of their finances.