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

Revolving credit, The revolving credit facility will be specified by the ba...

The revolving credit facility will be specified by the banker to the customer through providing specific amount of credit facility for a continuous basis. The borrower will not be

Marginal returns and negative marginal returns, 1) What is the difference b...

1) What is the difference between decreasing marginal returns and negative marginal returns?   2.) "A firm in monopolistic competition maximizes its profit by producing where it

What is period cost, What is period cost Period costs are those costs w...

What is period cost Period costs are those costs which are reported as expanses of the period in question. These are cost which are not assigned to the product but are charged

Standard costing and budgetary control , STANDARD COSTING AND BUDGETARY CON...

STANDARD COSTING AND BUDGETARY CONTROL In practice, the terms standard cost and budgeted cost might be used interchangeably. Whereas it is possible to have budgeting without s

Calculate the direct materials costs, XYZ Industries manufactures electroni...

XYZ Industries manufactures electronic testing equipment. XYZ also installs the equipment at customers' sites and ensures that it functions smoothly. Additional information on the

Standard costing system, Standard costing system However, it has been a...

Standard costing system However, it has been argued that traditional variance analysis is unhelpful and potentially misleading in the modern organization, and can make managers

Simulation models, SIMULATION MODELS Simulation is a method of analyzin...

SIMULATION MODELS Simulation is a method of analyzing a system by experimentally duplicating its behavior. Management accountants can be able to make meaningful inferences conc

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