accounts payable turnover ratio , Managerial Accounting

Assignment Help:

 

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.

 

 

 


Related Discussions:- accounts payable turnover ratio

What is the significance of performance budgeting, Significance of performa...

Significance of performance budgeting Performance budgeting will help the management of companies by introduction of management objective to improve performance. Further it wi

Explain the types of standards, Explain the Types of standards The foll...

Explain the Types of standards The following is the brief description of various types of standards: 1) Basic standards: these are the standards which are assumed to remai

Concentration banking, When the customers of the company are spread over br...

When the customers of the company are spread over broad geographical areas then in place of a particular collection centre the company opens collection centres at the regional stag

Break even analysis, BREAK EVEN ANALYSIS Break even analysis is mainly us...

BREAK EVEN ANALYSIS Break even analysis is mainly used to explain the relationship between the cost incurred, the volume operated at and the profit earned. To compute the breakev

Feedback control system, Feedback Control System Feedback is informatio...

Feedback Control System Feedback is information about actual achievements or actual results produced within the organization (e.g. management control reports) with the purpose

Conditions necessary in a control cycle, Conditions necessary in a control ...

Conditions necessary in a control cycle There are four necessary conditions that must be satisfied before any system can be said to be controlled. Such are as follows: (1) O

Financial statement, how to i get financial report for my company Anuz Wpp

how to i get financial report for my company Anuz Wpp

Cost, What are the limation of semi variable cost and how to overcome it?

What are the limation of semi variable cost and how to overcome it?

Time series analysis, what is semi average trend analysis using regression ...

what is semi average trend analysis using regression analysis method?

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