Financial Statement Analysis - Accounts Payable Turnover Ratio
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Measures how fast the company pays its suppliers.
Total purchases / {(opening balance + closing balance)/2}
Comparing two periods with each might show payment terms with suppliers.
If a company pays more slowly, it might indicate that the company’s cash flow position is deteriorating. It might also indicate better supplier payment terms, which is a good thing.
You can alter the formula to calculate specific information i.e.
- Ratio per specific supplier
- Ratio excluding cash payments
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