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Accounts receivable days or turnover ratio is calculated simply dividing receivables figure from Balance sheet by revenue from Income statement and multiplied by to convert into days.
By doing this, a credit controller or any person will be able to know how long does it take to receive payment from the inception of a sale. I.e the amount of time take to receive cash.
If for example the days are increasing, then this gives an alarming message to us as we are facing difficulty collecting cash from our customers.
Therefore this calculation is very important from a financial perspective.
Hope I answered your question.
