Another trick done with mirrors
Let’s assume that the company had annual revenues of $20,000,000. And let’s also assume that it had accounts receivable of $4,000,000.
Annual revenues = $20,000,000
Accounts Receivable (A/R) = $4,000,000
We can now do a calculation similar to the one we did for inventory.
Accountants would say that the company’s accounts receivable is “turning five times.” In other words, during the year, the company must collect five times the value of the accounts receivable to equal the value of the annual revenues.
Once again, we can almost hear you saying, “So what?” And once again, we agree. So let’s try to put this in a form ...
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