Accounts Payable Turnover Ratio

The accounts payable turnover ratio is a financial metric that measures how efficiently a company manages its accounts payable by comparing the amount of purchases made on credit to the average accounts payable balance. It is calculated by dividing the total purchases by the average accounts payable balance for a specific period. A higher turnover ratio typically indicates that a company is paying its suppliers more quickly, while a lower ratio may suggest inefficiencies in managing payables or slower payment practices.