Question

What relationship will be established to study:

Trade payables turnover

Answer 1

This ratio is known as Creditors Turnover Ratio. It is computed to determine the rate at which the amount is paid to the creditors. It establishes the relationship between net credit purchases and average accounts payables.

Payable Turnover Ratio = `"Net Credit Purchases"/"Average Accounts Payable"`

Net Credit Purchases = Total Purchases - Cash Purchases

Average Accounts Receivables = `(("Opening Creditors" + "Opening B/P") + ("Closing Creditors" + "Closing B/P"))/2`