Determine the creditors turnover ratio, Managerial Accounting

Assignment Help:

Creditors turnover ratio ( or payables turnover ratio)

Meaning: this ratio establishes a relation ship between net credit purchases and average trade creditors.

Objective: the objective of computing this ratio is to determine the efficiency with which the creditors are managed.

Components: there are two components of this ratio which are as under:

Net credit purchase

Average trade creditors

Computation: the average payment period ratio show the average number of days taken by the firm to pay its creditors. Generally lower the ratio the improved is the liquidity position of the firm and higher the ratio less liquid is the position of the firm. But a higher payment period also implies greater credit period enjoyed by the firm and consequently larger the profit reaped from credit suppliers. But one has to be careful in interpreting this ratio as higher ratio may also imply lesser discount facilities availed or higher prices paid for the goods purchased on credit. To make correct interpretation of this ratio a comparative analysis of different firm in the same industry and the trend may be found for various years.

 


Related Discussions:- Determine the creditors turnover ratio

draw a timeline for the assembly department, #queComputing equivalents uni...

#queComputing equivalents units and assigning costs to completed units and ending work in process; no beginning inventory or cost transferred in (30 -45min) Sue Electronics makes

Batch size of one-jit features, Batch size of one Set up time is the am...

Batch size of one Set up time is the amount of time needed to adjust tools and to retool for various product. Long set ups a change over time make the production of batches wit

What are the duties of the public company aob, What are the duties of the P...

What are the duties of the Public Company Accounting Oversight Board?

Illustrate the general design of waste heat boilers, Illustrate the General...

Illustrate the General Design of Waste heat boilers The boiler system shall be made up of a fire tube type heat exchanger, a steam drum with relief valve internals, risers and

Gardner manufacturing company produces, Gardner Manufacturing Company produ...

Gardner Manufacturing Company produces a product that sells for $120. A selling commission of 10% of the selling price is paid on each unit sold. Variable manufacturing costs are $

Types of games, Types of games Four basic ways in which competitive sit...

Types of games Four basic ways in which competitive situations (or games) can be classified are: (a) Number of Competitors: In game theory a competitor is characteriz

Job order costing, Prepare Summary Journal Entries to record the( 1) requi...

Prepare Summary Journal Entries to record the( 1) requistion slips

A local retail shoe shop , Shoe Shine is a local retail shoe shop located o...

Shoe Shine is a local retail shoe shop located on the north side of Centerville. Yearly demand for a popular sandal is 500 pairs, and John Dirk, the manager of Shoe Shine, has been

Multiple products, differentiate between multiple product , selling cots an...

differentiate between multiple product , selling cots and margin management

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd