![]() Also, the number of times a company pays off its accounts payable is reflected in the turnover ratio. The accounts payable turnover ratio of a company is an indicator of solvency or insolvency of a company relating to how quick a company pays off debt or owes its suppliers. What Does the Accounts Payable Turnover Ratio Tell You? Second, you can divide the total accounts payable for the beginning and end of the period by 2. First, you can deduct the accounts payable balance at the beginning of the period from the accounts payable balance at the end of the period to arrive at the average. There are two ways of calculating the average accounts payable of a company. ![]() The Formula for calculating the accounts payable turnover ratio is The accounts payable turnover ratio is a liquidity ratio that compares the net credit purchases by a company to the average accounts payable at a particular time. The ability of a company to pay off accounts payable and how efficient it is in paying is reflected in the accounts payable turnover ratio of the company.īack to: Accounting & Taxation How to Calculate the Accounts Payable Turnover Ratio This ratio is a short-term, liquidity ratio that measures the number of times a company pays off its suppliers during a period of time.Īccounts payable is the short-term debt a company owes is suppliers. The amounts payable turnover ratio of a company is the rate at which a company pays the debts that it owes its suppliers or vendors. Update Table of Contents What is the Accounts Payable Turnover Ratio? How to Calculate the Accounts Payable Turnover Ratio What Does the Accounts Payable Turnover Ratio Tell You? A Decreasing Accounts Payable Turnover Ratio An Increasing Accounts Payable Turnover Ratio Example of the Accounts Payable Turnover Ratio The Difference Between the Accounts Payable Turnover and Accounts Receivable Turnover Ratios Limitations of Using the Accounts Payable Turnover Ratio What is the Accounts Payable Turnover Ratio? ![]()
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