accounts payable turnover ratio , Managerial Accounting

 

Accounts Payable Turnover Ratio is a short-term liquidity measure which is used to calculate the rate at which a company pays off its suppliers. Accounts payable turnover ratio is computed by taking the total purchases done by suppliers and dividing it by the average accounts payable amount during the similar period.

2156_accounts payable turnover formula.png

The measure explains investors how many times per period the company pays its average payable amount. For instance, if the company makes $100 million in purchases from suppliers in a given year and at any given point owns an average accounts payable of $20 million then the accounts payable turnover ratio for the given period is 5 ($100 million/$20 million). If the turnover ratio is reducing from one period to another, this is a signal that the company is taking long time to pay off its suppliers than it was earlier. The opposite is true when the turnover ratio is rising, which shows that the company is paying of suppliers at a quicker rate.

 

 

 

Posted Date: 7/27/2012 3:45:01 AM | Location : United States







Related Discussions:- accounts payable turnover ratio , Assignment Help, Ask Question on accounts payable turnover ratio , Get Answer, Expert's Help, accounts payable turnover ratio Discussions

Write discussion on accounts payable turnover ratio
Your posts are moderated
Related Questions
QUESTION 1 PART A  You are provided with the given information relating to ABC Limited. The accountant is currently developing the budget for the next three months endin

Barker Company has a single product called a Zet. The company normally produces and sells 80,000 Zets each year at a selling price of $40 per unit. The company’s unit costs at this


Suppose the spot price for Euro is $1.30, the futures price for delivery in 6 months is $ 1.29675. Assume that the 6 month borrowing/lending rate in Euro is 1.5 percent (annually,

Hickory Company manufactures two products—14,000 units of Product Y and 6,000 units of Product Z. The company uses a plantwide overhead rate based on direct labor-hours. It is cons

Direct materials,4yard at$3.50per yard...$14.00 Direct labor,1.5direct labor hours at $12.00 per direct labor hour....$18 Variableoverhead,1.5 direct labour hours at $2.00 per dire

Interpretation of equity ratio As equity ratio show the relationship of owner funds to total assets higher the ratio or the share of the shareholders in the total capital of th

Determine the Scope and areas of cost reduction Scope and areas of cost reduction the scope of cost reduction is so wide that it is not practicable to develop fully the areas i

Simple Queues A simple queue has the following characteristics; 1) There is a simple service channel 2) There are ‘discrete’ customers e.g. customers in a bank, or aircra

If a company creates sales to a number of customers on credit terms this will have to wait for two or still three months before its debtors pay that they owe. It means that the deb