Financial Statement Analysis - Accounts Payable Turnover Ratio

Financial statement analysis

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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Petar Soldo