Let's say, the company sells $120,000 in credit sales per year and has an average AR balance of $10,000. $120,000 divided by 10,000 = 12. A receivables turnover ratio of 12 means that the company, on average, collects its credit sales AR from customers within 30 days.

 

Our two companies we will use are Dr.Martens and Timberlands:

 

1) Identify a publicly traded company and search for or calculate its receivables turnover ratio?

2) Compare it to another company in the same industry?

3) Were the ratios the same or different? Do you think the ratio is good or bad?