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Question
Calculate Trade Payables Turnover Ratio (up-to two decimal places) from the following information:
| Particulars | (₹) |
| Trade Payables at the beginning of the year | 70,000 |
| Trade Payables at the end of the year | 80,000 |
| Payment to Trade Payables | 3,20,000 |
| Returns to Credit suppliers | 30,000 |
Solution
Average trade payables = `("Trade payables at beginning" + "Trade payables at end")/2`
`= (70,000 + 80,000)/2`
`= (1,50,000)/2`
= ₹ 75,000
Net credit purchases = Payment made to trade payables + Trade payables at end - Trade payables at beginning
= 3,20,000 + 80,000 - 70,000
= ₹ 3,30,000
Trade Payables Turnover Ratio = `"Net Credit Purchases"/"Average Trade Payable"`
`= (3,30,000)/(75,000)`
= 4.4 times
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RELATED QUESTIONS
Answer briefly of the following question :
Mention whether the following Trade Payables are current liabilities or non-current liabilities:
Operating Cycle Expected period of Payment
(a) 12 months 14 months
(b) 15 months 12 months
Where are amounts owed by customers for credit purchases found?
Average Payment Period is particularly useful for ______ since it helps in knowing bill- paying patterns of the firm.
