Accounts receivable conversion (ARC) is a financial metric that measures the percentage of a company's credit sales that are collected within a certain period of time, typically within one year. This metric is used to assess a company's credit and collections policies, as well as its overall financial health.
A company's accounts receivable conversion ratio can be calculated by dividing its total credit sales for a period by its average accounts receivable for the same period. For example, if a company had credit sales of $100,000 in a year and its average accounts receivable during that year was $10,000, its accounts receivable conversion ratio would be 10%.
A high accounts receivable conversion ratio indicates that a company is efficient in collecting its receivables, while a low ratio may indicate that the company's credit and collections policies are lax or that its customers are taking advantage of its leniency.
What is the meaning of accounts receivable?
Accounts receivable refers to the money owed to a business by its customers for goods or services that have been provided. Accounts receivable is considered to be a short-term asset on a company's balance sheet, since it is typically due to be paid within one year. What is a conversion account? A conversion account is an account used to record the conversion of one currency to another. The account is used to track the value of the currency being converted and to record any gains or losses on the conversion. What are the five modes of transfer? The five modes of transfer are:
1. Direct transfer
2. Indirect transfer
3. Split-level transfer
4. Combined transfer
5. Partial transfer What does arc mean in writing? The word "arc" can mean different things in different contexts. In accounting, an "arc" is typically a short-term loan that is used to finance a company's working capital. The loan is typically repaid within a year, and the interest rate is usually higher than the company's normal borrowing rate. What is the entry for accounts receivable? The entry for accounts receivable would include a debit to the accounts receivable account and a credit to the sales account.