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Which type of sales/purchase is taken into account while calculating the Trade Payable Turnover Ratio? |
Total credit purchases Total cash sales Total credit sales Total cash purchases |
Total credit purchases |
The correct answer is option 1- Total credit purchases. Total credit purchases is taken into account while calculating the Trade Payable Turnover Ratio. Trade payables turnover ratio indicates the pattern of payment of trade payable. As trade payable arise on account of credit purchases, it expresses relationship between credit purchases and trade payable. It is calculated as follows: Net Credit purchases/ Average trade payable. |
