ARTO should use net receivables, not gross. Think if it this way, when we reserve for doubtful accounts, we reduce gross sales as well (Cr. Allowance for doubtful accouns, Dr. Sales). Therefore, ARTO is net sales/avg net receivables.
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Arvind Mohan
Director/Manager
San Carlos CA
United States
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Original Message:
Sent: 09-22-2023 04:26 PM
From: Neha Aggarwal
Subject: Part-2: Account Receivable turnover ratio
Dear All
Could you please help in confirming the formula for Account receivable turnover ratio. Does it use average gross receivables or Net receivables.
Below is a question for your reference. Please help with the answer-
Thank you
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Regards
Neha Aggarwal
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