![]() ![]() Now, let’s calculate the Accounts Payable Turnover Ratio: = (Beginning Accounts Payable + Ending Accounts Payable) / 2.Ending Accounts Payable for the year: $150,000įirst, let’s calculate the Average Accounts Payable:.Beginning Accounts Payable for the year: $100,000.Cost of Goods Sold (COGS) for the year: $900,000.Here’s the financial data for Fresh Bakery: We’ll use the Accounts Payable Turnover Ratio to evaluate the company’s efficiency in managing its accounts payable. Let’s consider a fictional company called “Fresh Bakery,” which specializes in producing and selling freshly baked goods. Example of an Accounts Payable Turnover Ratio Comparing the ratio to industry benchmarks or the company’s historical data can provide insights into the company’s cash flow management and competitiveness within the industry. When analyzing the Accounts Payable Turnover Ratio, it’s important to consider industry norms and the company’s historical performance. It can be calculated as (Beginning Accounts Payable + Ending Accounts Payable) / 2. Average Accounts Payable is the average balance of accounts payable during the accounting period.Cost of Goods Sold (COGS) is the total cost of producing or purchasing the goods sold by the company during the accounting period.The formula for calculating the Accounts Payable Turnover Ratio is:Īccounts Payable Turnover Ratio = Cost of Goods Sold (COGS) / Average Accounts Payable A higher ratio indicates that the company pays its suppliers more frequently, while a lower ratio suggests it takes longer to pay its bills. This ratio helps assess the efficiency of a company’s cash flow management and its ability to meet short-term obligations, as well as its relationships with suppliers. Accounts Payable Turnover Ratio is a financial metric that measures how frequently a company pays its suppliers within a specific period. ![]()
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