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Construction glossary
Construction Glossary •

Receivables Turnover Ratio

What is a Receivables Turnover Ratio?

The Receivables Turnover Ratio (RTR) in the construction industry is a critical financial metric that measures the efficiency with which a construction company can collect from its clients. This ratio indicates the number of times a company's accounts receivables are collected, or "turned over," during a specific period. It is calculated by dividing the company's net credit sales by its average accounts receivable. A higher RTR implies that the company collects its receivables more frequently, indicating efficiency in its credit and collection processes. On the other hand, a lower RTR suggests that the firm needs to revisit its credit policy as its customers may be delaying payments, which could impact cash flow - a vital aspect in the construction business.

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Other construction terms

General Ledger (G/L)

What is a General Ledger (G/L)?

A General Ledger (G/L) in the construction industry is a fundamental financial tool for recording all financial transactions of a construction company including assets, liabilities, equity, revenue, a...
Field

What is a Field?

A field in the construction industry refers to a physical area or a project site where construction activities take place. These fields are typically outdoors, such as building sites or highway projec...
Draw Request

What is a Draw Request?

A Draw Request, in the realm of construction, is a formal process involving a requisition for payment for work performed on a specific job or within a specified period on a project. This request is ty...

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