Accounts Payable Turnover Rate (Ratio)

The accounts payable turnover rate is a business activity ratio measuring the frequency of the company’s ability to pay its vendors and suppliers. The numerical value is customarily reported as an annual value. The higher the number, the more often the payables are cleared (paid). A ’12’ would indicate that all payables are paid every month (360 days/12 = 30 days). Ideal values exceed 20 as this indicates all accounts are paid on average at least every 18 days (360 days/20 = 18 days).

There are several fundamental principles involved with this ratio and as a business entrepreneur you should gain a full understanding of the formula. It is easy to manipulate the results and there is proper application of the formula in

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