Trade Payables Turnover Ratio takes into account which of the following?

Total credit purchases

The correct answer is option 1- Total credit purchases.

* Trade Payables Turnover Ratio takes into account Total credit purchases.

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:
Trade Payables Turnover ratio = Net Credit purchases/ Average trade payable.

It reveals average payment period. Lower ratio means credit allowed by the supplier is for a long period or it may reflect delayed payment to suppliers which is not a very good policy as it may affect the reputation of the business. The average period of payment can be worked out by days/ months in a year by the Trade Payable Turnover Ratio.