The Receivables Turnover Ratio is a financial metric that measures how efficiently a construction company is able to collect payments from its customers. This ratio is calculated by dividing the net credit sales by the average accounts receivable balance. A high receivables turnover ratio indicates that the company is able to collect payments quickly, which is important in the construction industry where cash flow is crucial for project financing and operations.A low receivables turnover ratio, on the other hand, may indicate that the company is having difficulty collecting payments from customers, which can lead to cash flow problems and delays in project completion. Construction companies often have to deal with extended payment terms and slow-paying customers, making it important to closely monitor and improve their receivables turnover ratio.
What is Receivables Turnover Ratio?
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