One measure of how quickly a company can convert its accounts receivable into cash is the days' sales uncollected, also called days' sales in receivables.

Days' sales uncollected = (accounts receivable/net sales) x 365

We use days' sales uncollected to estimate how much time is likely to pass before the current amount of accounts receivable is received in cash. It is used to determine if cash is being collected quickly enough to pay upcoming obligations.

Company	$ millions	2017	2016	2015
Starbucks	Accounts receivable	$870	$769	$719
	Net sales	$22,387	$21,316	$19,163
	Days' sales uncollected	14.2 days	13.2 days	13.7 days
Jack in the Box	Accounts receivable	$69	$73	$48
	Net sales	$1,554	$1,599	$1,540
	Days' sales uncollected	16.2 days	16.7 days	11.4 days

Days' sales uncollected for Starbucks is 14.2 days, computed as ($870/$22,387) x 365 days. This means it takes 14.2 days to collect cash from ending accounts receivable. This number reflects one or more of the following factors: a company's ability to collect receivables, customer financial health, customer payment strategies, and discount terms. To further assess Starbucks, we compare it to Jack in the Box. We see that Starbucks's 14.2 days' sales uncollected is better than Jack in the Box's 16.2 days' sales uncollected. Starbucks took less time to collect its receivables. The less time money is tied up in receivables the better.

Accounts Receivable Turnover

Accounts receivable turnover helps assess the quality and liquidity of receivables. Quality of receivables is the likelihood of collection without loss. Liquidity of receivables is the speed of collection. Accounts receivable turnover measures how often receivables are collected during the period.

Accounts receivable turnover = net sales/average net accounts receivable

The denominator is the average accounts receivable, net balance, computed as (beginning balance + ending balance)/2. Accounts receivable turnover shows how well management is doing in granting credit to customers. A high turnover suggests that management should consider using less strict credit terms to increase sales. A low turnover suggests management should consider more strict credit terms and more aggressive collection efforts to avoid having assets tied up in accounts receivable.

Company	$ millions	2017	2016	2015
Visa	Net sales	$18,358	$15,082	$13,880
	Average net accounts receivable	$1,087	$944	$835
	Accounts receivable turnover	16.9	16.0	16.6
Mastercard	Net sales	$12,497	$10,776	$9,667
	Average net accounts receivable	$1,693	$1,248	$1,094
	Accounts receivable turnover	7.4	8.6	8.8

Visa's current year turnover is 16.9, computed as $18,358/$1,087 ($ millions). This means that Visa's average accounts receivable balance was converted into cash 16.9 times in 2017. Its turnover slightly increased in 2017 from 2016. Visa's turnover also exceeds that for Mastercard in each of these 3 years. Both Visa and Mastercard seem to be doing an adequate job of managing receivables.

• Calculate days' sales uncollected and accounts receivable turnover for both company's
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• Provide ratio analysis for each company