## Understanding Accounts Payable TurnoverIn this section, we explore how to calculate the accounts payable turnover, a critical financial metric that helps assess how efficiently a company is paying its suppliers.### Information ProvidedRoberts Company reported the following details for the fiscal year:- **Accounts Payable:** - Beginning of year: $75,000 - End of year: $125,000- **Net Sales:** $1,600,000- **Cost of Goods Sold (COGS):** $800,000### Calculating the Accounts Payable TurnoverTo find the accounts payable turnover ratio, use the formula:\[ \text{Accounts Payable Turnover} = \frac{\text{Cost of Goods Sold}}{\text{Average Accounts Payable}} \]#### Steps:1. **Calculate the Average Accounts Payable:** \[ \text{Average Accounts Payable} = \frac{\text{Beginning Accounts Payable} + \text{End of Year Accounts Payable}}{2} \] \[ \text{Average Accounts Payable} = \frac{75,000 + 125,000}{2} = 100,000 \]2. **Apply the Formula:** \[ \text{Accounts Payable Turnover} = \frac{800,000}{100,000} = 8.0 \]### Interpretation- A high accounts payable turnover ratio, like this one, typically suggests that a company is paying its suppliers promptly.- This ratio reflects the company's efficiency in managing its payable obligations.### Diagram DescriptionThe diagram illustrates the formula for accounts payable turnover and highlights its significance. A higher ratio indicates timely payment to suppliers, integral for managing supplier relationships and cash flow efficiently.

Cost of Goods Sold Accounts Payable Turnover Average Accounts Payable Company Is paylng suppllers In a timely manner High accounts payable ratio ok t Knowledge Check 01 Roberts Company reported the following information: ces Accounts Payable: Beginning of year End of year 75,000 125,000 1,600,000 800,000 Net sales Cost of goods sold What is the company's accounts payable turnover ratio? (Round your answer to 1 decimal pl- Accounts payable turnover ratio

Cost of Goods Sold Accounts Payable Turnover Average Accounts Payable Company Is paylng suppllers In a timely manner High accounts payable ratio ok t Knowledge Check 01 Roberts Company reported the following information: ces Accounts Payable: Beginning of year End of year 75,000 125,000 1,600,000 800,000 Net sales Cost of goods sold What is the company's accounts payable turnover ratio? (Round your answer to 1 decimal pl- Accounts payable turnover ratio

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Subject: accounting
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