This accounts payable turnover Excel template lets you quickly calculate the accounts payable turnover ratio and measure the number of times a company pays its suppliers in one year.
Accounts payable turnover ratio is a financial ratio of the net credit purchases of a business to its average accounts payable for one year. Accounts payable turnover is simply the number of times a company pays its suppliers in one year.
It can also be used to evaluate how fast or slow a company is paying off its suppliers. Accounts payable turnover is sometimes referred to as the creditor’s velocity or creditor’s turnover ratio. The amounts from average accounts payable and the number of times suppliers are paid a good measure of the short term liquidity of a business.
How to Use the Excel Spreadsheet
This is a model for beginners to learn how the A/P turnover ratio works. Simply input the following information:
- The net credit sales for the period
- The amount of product returns for the period
- Accounts payable at the beginning of the period
- Accounts payable at the end of the period
- The number of days in a period (usually 365)
The template will then calculate the accounts payable turnover ratio and show you the payable turnover in days value as well.
You can find out more about the accounts payable turnover ratio, including more detailed examples, in our lesson here:
FAQs
1. What is the accounts payable turnover ratio?
The accounts payable turnover ratio is a financial ratio that measures how many times a company pays its suppliers in one year. Accounts payable turnover is simply the number of times a company pays its suppliers in one year.
2. How do you calculate the accounts payable turnover?
The accounts payable turnover ratio is calculated by dividing the net credit purchases of a business by its average accounts payable.
The formula for calculating the accounts payable turnover ratio is:
A/P Turnover Ratio = (Net Credit Purchases ÷ Average Accounts Payable)
3. What is an example calculation of accounts payable turnover ratio?
Supposed a company has net Credit Sales of $1,000,000, a product return of $10,000, an average accounts payable of $50,000, and the number of days in a year is 365.
The accounts payable turnover ratio would be calculated as:
A/P Turnover Ratio = (Net Credit Purchases ÷ Average Accounts Payable)
A/P Turnover Ratio = (1,000,000 ÷ 50,000)
A/P Turnover Ratio = 20
4. What is the importance of understanding the accounts payable turnover ratio?
By understanding their accounts payable turnover ratio, businesses can measure how quickly they are paying off their suppliers. This information can be used to make better business decisions about how to manage and improve their liquidity.
In addition, businesses can also use the accounts payable turnover ratio as a benchmark to compare their performance against their competitors.
5. What is good payable turnover ratio?
A high payable turnover ratio is good, as it shows that the company is able to pay its suppliers quickly. A low payable turnover ratio may suggest that the company has liquidity problems.
