Business – 10.2 Analysis of published accounts – Financial efficiency ratios | e-Consult
10.2 Analysis of published accounts – Financial efficiency ratios (1 questions)
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Calculation:
- Trade Payables Turnover (times) = Cost of Sales ÷ Average Trade Payables = £720,000 ÷ £60,000 = 12 times.
- Trade Payables Turnover (days) = 365 ÷ Turnover (times) = 365 ÷ 12 ≈ 30.4 days.
Interpretation: On average the company takes about 30 days to pay its suppliers. This suggests a relatively moderate credit period; if the industry norm is shorter, the company may be using supplier credit to help finance its operations, whereas a longer period than peers could indicate cash‑flow pressure.