 Accounts Receivable Turnover measures the ability to collect cash from customers. A low ratio could indicate credit policies that are too loose. When it's too high, this may indicate that credit is too tight, and that may cause businesses to lose sales to good customers. Accounts Receivable Turnover is a measure of efficiency. The formula is net sales revenue divided by the average net accounts receivable. Average net accounts receivable is calculated by taking the beginning net accounts receivable plus the ending net accounts receivable and dividing by two. Here is an income statement from a sample company. I've highlighted net sales revenue and will use that information to determine the accounts receivable turnover. Additionally, we need some information from the current asset section of the balance sheet. I've highlighted two years worth of net accounts receivable balances. For 2016, net sales revenue divided by average net AR, which gives us our accounts receivable turnover of 110.59. This means that a company is collecting receivables over 110 times a year, about once every three days. This result is so good that this is actually probably a business that has a lot of cash sales rather than sales on account.