Credit Purchases Turnover Ratio

Credit Purchases Turnover Ratio is the ratio that shows how much a company purchased goods on credit or account from its suppliers and to pay them within the accounting cycle. It is also known as Accounts Payable Turnover Ratio / Creditors Turnover Ratio.

Mathematically, we can show it as shown below:

Credit Purchases Turnover Ratio = Net Credit Purchases / Average Accounts Payable

 

If this ratio is good, then it means that the company pay its bills to suppliers quickly and in time. However, it totally depends upon the particular type of industry in which a company is operating its business.