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.
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.
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