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

Explain out of pocket cost, Explain Out of pocket cost A cost which wil...

Explain Out of pocket cost A cost which will have to be paid to outsides as against cross such as depreciation, which do not require any cash payment this cost is relevant in t

Explain about intra company transfer pricing, Intra company transfer pricin...

Intra company transfer pricing A company engaged in production may have several segments division or departments doing production jobs or manufacturing party or fully finished

Implied interest rate, Suppose the spot price of gold is $1700 per ounce. T...

Suppose the spot price of gold is $1700 per ounce. The futures price for delivery in six months is $1712, while the futures price for delivery in one year is $1720. The interest ra

Accounting Ratios, Explain TWO limitations of using accounting ratios to as...

Explain TWO limitations of using accounting ratios to assess the performance of a firm and suggest how each limitation may be improved

Queuing theory, QUEUING THEORY When limited facilities fail/delays to s...

QUEUING THEORY When limited facilities fail/delays to satisfy demands made upon them, problems occur which generate queues or waiting lines. Illustrations are: •    Customers

Cost analysis purposes, Cost Analysis purposes For purposes of cost ana...

Cost Analysis purposes For purposes of cost analysis, the desegregation of the generic value chain into individual value activities should reflect three principles that are not

Standard costing .., the applicability of standard costing in modern manufa...

the applicability of standard costing in modern manufacturing environments in volatile environments

Duffy tol and stamping, What are the objectives of excellence teams and min...

What are the objectives of excellence teams and minicompanies? Did the companies achieve these objectives?estion #Minimum 100 words accepted#

State the factors of cvp, State the factors of CVP The three factors of...

State the factors of CVP The three factors of CVP analysis I e cost volume and profit are interconnected and dependent on one another . for example profit depends upon sales se

Long run shutdown point, what are the factors should be considered before ...

what are the factors should be considered before terminated the operation of a losing firm??

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