body {
font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif;
line-height: 1.6;
color: #333;
max-width: 800px;
margin: 0 auto;
padding: 20px;
background-color: #f9f9f9;
}
.calculator-container {
background: #ffffff;
padding: 30px;
border-radius: 12px;
box-shadow: 0 4px 15px rgba(0,0,0,0.1);
margin-bottom: 40px;
}
h1 {
text-align: center;
color: #2c3e50;
margin-bottom: 10px;
}
.calc-intro {
text-align: center;
margin-bottom: 25px;
color: #666;
font-size: 0.95em;
}
.input-group {
margin-bottom: 20px;
}
label {
display: block;
margin-bottom: 8px;
font-weight: 600;
color: #2c3e50;
}
input[type="number"] {
width: 100%;
padding: 12px;
border: 1px solid #ddd;
border-radius: 6px;
font-size: 16px;
box-sizing: border-box;
transition: border-color 0.3s;
}
input[type="number"]:focus {
border-color: #3498db;
outline: none;
}
.hint {
display: block;
font-size: 0.8em;
color: #7f8c8d;
margin-top: 4px;
}
button.calc-btn {
width: 100%;
padding: 15px;
background-color: #2980b9;
color: white;
border: none;
border-radius: 6px;
font-size: 18px;
font-weight: bold;
cursor: pointer;
transition: background-color 0.2s;
margin-top: 10px;
}
button.calc-btn:hover {
background-color: #1a5276;
}
#results-area {
margin-top: 30px;
padding: 20px;
background-color: #f1f8ff;
border-radius: 8px;
border-left: 5px solid #3498db;
display: none;
}
.result-row {
display: flex;
justify-content: space-between;
align-items: center;
margin-bottom: 15px;
border-bottom: 1px solid #e1e4e8;
padding-bottom: 10px;
}
.result-row:last-child {
border-bottom: none;
margin-bottom: 0;
}
.result-label {
font-weight: 600;
color: #34495e;
}
.result-value {
font-size: 1.4em;
font-weight: bold;
color: #2980b9;
}
.article-content {
background: #fff;
padding: 30px;
border-radius: 12px;
box-shadow: 0 2px 10px rgba(0,0,0,0.05);
}
h2 {
color: #2c3e50;
margin-top: 30px;
border-bottom: 2px solid #ecf0f1;
padding-bottom: 10px;
}
h3 {
color: #34495e;
margin-top: 20px;
}
p {
margin-bottom: 15px;
}
.formula-box {
background-color: #f8f9fa;
padding: 15px;
border-radius: 6px;
border: 1px dashed #bdc3c7;
font-family: monospace;
text-align: center;
margin: 20px 0;
font-size: 1.1em;
}
ul {
margin-bottom: 20px;
padding-left: 20px;
}
li {
margin-bottom: 8px;
}
@media (max-width: 600px) {
.calculator-container, .article-content {
padding: 20px;
}
}
How to Calculate the Accounts Receivable Turnover Rate
The Accounts Receivable (AR) Turnover Ratio is a critical efficiency ratio used in financial accounting to measure how many times a business can turn its accounts receivable into cash during a specific period. It effectively quantifies a company's effectiveness in extending credit and collecting debts.
To calculate the accounts receivable turnover rate, take the Net Credit Sales and divide it by the Average Accounts Receivable for the same period.
AR Turnover Ratio = Net Credit Sales / Average Accounts Receivable
Understanding the Inputs
- Net Credit Sales: This represents the revenue generated from sales made on credit, excluding cash sales. Returns and allowances should be subtracted to get the "net" figure.
- Average Accounts Receivable: Since receivable balances fluctuate throughout the year, using a single date's balance can be misleading. The average is calculated by adding the beginning and ending balances of the period and dividing by two.
Calculation Example
Consider a company, TechSupplies Inc., with the following financial data for the fiscal year:
- Net Credit Sales: $850,000
- Beginning Accounts Receivable (Jan 1): $60,000
- Ending Accounts Receivable (Dec 31): $80,000
First, we calculate the Average Accounts Receivable:
($60,000 + $80,000) / 2 = $70,000
Next, we apply the turnover formula:
$850,000 / $70,000 = 12.14
This means TechSupplies Inc. collected its average accounts receivable approximately 12.14 times during the year.
Interpreting the Results
Once you calculate the ratio, it provides insight into the company's liquidity and operational efficiency:
High Turnover Ratio
A higher ratio generally indicates that the company's collection mechanism is efficient, customers are paying their debts quickly, or the company has a conservative credit policy (lending only to high-quality customers). While usually positive, an extremely high ratio might suggest credit policies are too strict, potentially causing lost sales.
Low Turnover Ratio
A lower ratio may signal that the company's collection processes are poor, it is extending credit to non-creditworthy customers, or customers are struggling to pay their invoices. This can lead to cash flow issues.
Average Collection Period
This calculator also provides the "Average Collection Period" (often called Days Sales Outstanding or DSO). This metric converts the ratio into days, showing the average number of days it takes to collect a payment.
Average Collection Period = 365 / AR Turnover Ratio
In our previous example, 365 / 12.14 equals approximately 30 days. This means it takes the company about a month to collect payment after a sale is made.
function calculateARTurnover() {
// Get input values
var netCreditSales = document.getElementById('netCreditSales').value;
var beginAR = document.getElementById('beginAR').value;
var endAR = document.getElementById('endAR').value;
// Validate inputs
if (netCreditSales === "" || beginAR === "" || endAR === "") {
alert("Please fill in all fields to calculate the ratio.");
return;
}
var salesVal = parseFloat(netCreditSales);
var beginVal = parseFloat(beginAR);
var endVal = parseFloat(endAR);
if (isNaN(salesVal) || isNaN(beginVal) || isNaN(endVal)) {
alert("Please enter valid numeric values.");
return;
}
if (salesVal < 0 || beginVal < 0 || endVal < 0) {
alert("Values cannot be negative.");
return;
}
// Calculate Average Accounts Receivable
var avgAR = (beginVal + endVal) / 2;
// Prevent division by zero
if (avgAR === 0) {
alert("Average Accounts Receivable is zero. Cannot calculate turnover ratio (division by zero).");
return;
}
// Calculate Ratio
var turnoverRatio = salesVal / avgAR;
// Calculate Days (Average Collection Period)
// Using 365 days for the year standard
var collectionPeriod = 365 / turnoverRatio;
// Display Results
document.getElementById('displayAvgAR').innerHTML = "$" + avgAR.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('displayRatio').innerHTML = turnoverRatio.toFixed(2);
// Handle infinity for collection period if ratio is 0 (though unlikely given checks above)
if (isFinite(collectionPeriod)) {
document.getElementById('displayDays').innerHTML = collectionPeriod.toFixed(1) + " days";
} else {
document.getElementById('displayDays').innerHTML = "N/A";
}
// Show result area
document.getElementById('results-area').style.display = 'block';
}