It is difficult to make a categorical statement on whether this is good for an analyzed company or not - if consumer loans are an important part of the company's marketing strategy the accounts receivable will grow, but this will lead to an increase in the sales volume.
Decreasing accounts receivable turnover trend witnesses the fact that the firm's clients divert financial resources of the company for a less period on average.
It is also important to analyze the dynamics of this ratio. It is reasonable to choose similar-sized companies for such comparison, for example, those that possess similar amounts of assets. For instance, if the company has set 15 days as a maximum term for consumer loans, the accounts receivable turnover must not exceed this value. For more precise estimation, the accounts receivable turnover values should be compared with main competitors. Using this ratio the analyst can measure the accounts receivable management efficiency on a firm. The ratio reflects the payment history of the firm's clients.
In other words, this indicator measures the efficiency of the firm's collaboration with clients, and it shows how long on average the company's clients pay their bills. Accounts Receivable Turnover (Days) (Average Collection Period) – an activity ratio measuring how many days per year averagely needed by a company to collect its receivables.
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