Practicing Success
Which of the following does Trade Payables Turnover Ratio takes into account which of the following? |
Total credit purchases Total credit sales Total Purchases Total cash purchases |
Total credit purchases |
Trade payables turnover ratio (Creditors 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: 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] |