Meaning Of Debtors Turnover Ratio. The stock turnover ratio determines how soon an enterprise sells its goods and products and replaces its inventories in a set duration. High and low debtor’s turnover ratio • low collection period allowed to customers.

A receivable turnover ratio of 2 would give an average collection period of 6 months (12 months / 2), and similarly, 6 would give 2 months (12 months / 6). Debtors turnover ratio formula indicates the velocity of debt collection of a firm. Debt collection period = 12 months ÷ 4 = 3 months.

Accounts Receivable Turnover Definition. Accounts receivable turnover measures how efficiently a company uses its asset. Here’s an example of an a/r turnover ratio calculation:

Pay off its short term debts/obligations Accounts receivable turnover is measured in monthly, quarterly, and annual periods. It is an important indicator of a company's financial and operational performance.