Account Receivable Days indicate the average number of days a company takes to settle invoices. To calculate this ratio, investors analyze the average number of days it takes for the company to receive payments due for its sales.
The lower number of days is good because it indicates that the company is taking less time to receive its payments.
The formula for calculating Account Receivable Day
Example: For the financial year, Page Industries reported an Account Receivable Turnover Ratio of 13.65.
The value as per the formula (365 Days / Accounts receivables Turnover Ratio) is calculated as [365 (Days) / 26.75] = 13.65.