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Friday, June 17, 2011

Accounts Payable Turnover Ratio Analysis

Definition: Accounts Payable Turnover Ratio shows how many times trade payables turnover during an accounting period. A lower ratio may indicate that the firm is having difficulty to pay its creditors.

Formula:
Accounts Payable Turnover Ratio = Cost of Goods Sold / Average Accounts Payable

Example:
Makemoney Ltd has the following data:
Trade creditors at start of year: $10,000
Trade creditors

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