The formula for calculating Trade Payables Turnover Ratio is :

The correct answer is option 2- Net Credit Purchases/Average trade payable.

Trade Payables Turnover ratio = Net Credit purchases/ Average trade payable,
Where Average Trade Payable = (Opening Creditors and Bills Payable + Closing Creditors and Bills Payable)/2

 

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.