To calculate the accounts payable turnover in days, simply divide 365 days by the payable turnover ratio. The accounts payable turnover in days shows the average number of days that a payable remains unpaid. The turnover ratio would likely be rounded off and simply stated as six. Therefore, over the fiscal year, the company’s accounts payable turned over approximately 6.03 times during the year. The company wants to measure how many times it paid its creditors over the fiscal year. Accounts payable at the beginning and end of the year were $12,555 and $25,121, respectively. Example of Accounts Payable Turnover RatioĬompany A reported annual purchases on credit of $123,555 and returns of $10,000 during the year ended December 31, 2017. Average accounts payable is the sum of accounts payable at the beginning and end of an accounting period, divided by 2. In some cases, cost of goods sold (COGS) is used in the numerator in place of net credit purchases.

The formula for the accounts payable turnover ratio is as follows: The ratio is a measure of short-term liquidity, with a higher payable turnover ratio being more favorable. The accounts payable turnover ratio, also known as the payables turnover or the creditor’s turnover ratio, is a liquidity ratio that measures the average number of times a company pays its creditors over an accounting period. Updated JanuWhat is the Accounts Payable Turnover Ratio?

Receivable turnover ratio