Insert the information in the form and the calculator will determine the accounts payable turnover ratio.

What is the accounts payable turnover ratio?

The accounts payable turnover ratio is a measurement for the short term liquidity. It helps in quantifying the rate at which the frim pays off it's suppliers.

How to calculate accounts payable turnover ratio?

To calculate accounts payable turnover ratio you should use the following formula:
accounts payable turnover ratio = total credit purchase / average accounts payable
where:
average accounts payable = (beginning accounts payable + ending accounts payable) / 2

example: company x purchased materials in the last year from on e supp;lier and the credit purchases were $54,000,000 accounts payable was $15,000,000 in the start of the year and in the end of the year the accounts payable became $25,000,000, calculate the accounts payable turnover ratio?

Using the accounts payable turnover ratio formula the answer will be:

accounts payable turnover ratio = total credit purchase / average accounts payable
accounts payable turnover ratio = $54,000,000 / (($15,000,000 + $25,000,000) / 2)
accounts payable turnover ratio = 2.7

Why use accounts payable turnover ratio?

Investors use theaccounts payable turnover ratio in order to determin eif the company has enough cash to cover it's short term obligations.