Accounts Payable Turnover

Accounts Payable Turnover

What is Accounts Payable Turnover?

Accounts payable turnover is a financial ratio that measures how many times a company pays its average accounts payable balance in a specific period. It assesses the efficiency of managing trade credit.

Introduction: The Accounts Payable Turnover (APT) ratio is a key financial metric that measures the rate at which a business pays off its suppliers over a specific period, typically a year. It provides insight into the company's short-term liquidity and its efficiency in managing payables.

Importance: Understanding the APT ratio helps businesses gauge their payment practices against industry standards and assess their financial health. A high turnover ratio may indicate prompt payments to suppliers, which could lead to discounts and improved relationships. Conversely, a low ratio suggests slower payments, which may signal cash flow issues but also strategic cash management.


  1. Total Supplier Purchases: Sum of all purchases made from suppliers during the period.
  2. Average Accounts Payable: The average of the opening and closing balances of accounts payable for the period.
  3. APT Ratio Formula: APT = Total Supplier Purchases / Average Accounts Payable.

Strategies for Optimization:

  • Improve Cash Flow Management: Ensure sufficient liquidity to cover payables when they are due.
  • Negotiate Better Payment Terms: Longer payment terms with suppliers can help manage cash flow more effectively.
  • Leverage Early Payment Discounts: Take advantage of discounts offered by suppliers for early payment, where feasible.

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