ECONOMICS

Detailed explanation-1: -Thus receivables turnover is a measure of liquidity since it shows how efficient is the company in its cash collections.

Detailed explanation-2: -The most common measures of liquidity are: Current Ratio – Current assets minus current liabilities. Quick Ratio – The ratio of only the most liquid assets (cash, accounts receivable, etc.) compared to current liabilities.

Detailed explanation-3: -Accounts receivable turnover is a liquidity ratio that measures how quickly a company can collect its receivables. It is calculated by dividing the annual net sales by the average accounts receivable. This ratio tells you how efficiently a company is collecting its receivables.

Detailed explanation-4: -It measures how efficiently and quickly a company converts its account receivables into cash within a given accounting period. Accounts Receivable (AR) Turnover Ratio Formula & Calculation: The AR Turnover Ratio is calculated by dividing net sales by average account receivables.

Detailed explanation-5: -Cash ratio: The cash ratio is the strictest means of measuring a company’s liquidity because it only accounts for the highest liquidity assets, which are cash and liquid stocks. Use this formula to calculate cash ratio: Cash Ratio = (Cash and Cash Equivalents) / Current Liabilities.