Receivables Turnover Ratio

How well are you collecting your bills? You're a sweater retailer, LambHair 'R' Us, and you sell everything on a Net 30 basis. That is, you sell a sweater in your store, and then 100% of the people who buy from you, get a bill on paper, old school, in the snail mail, and they pay you 30 days later.

So what then is your receivables turnover ratio? Well, you collect your bills to the tune of $3 million this year. That is, you had $3 million in legal fees that came to your law firm this year. At any one time, you had assets of $300,000 in receivables out there, i.e. that much dough billed to your now-totally-innocent-not-at-all-guilty-of-dealing-meth clients. So your RTR then is 10:1. That is, you have only a tenth of your total revenues "at risk" at any given time relative to everything else.

Low risk for a drug-defending law firm, all things considered.