Payables Turnover
Payables turnover is a financial metric used to measure the liquidity of a company’s accounts payable. It is calculated by dividing the total amount of accounts payable by the average amount of accounts payable over a given period of time. The higher the turnover rate, the more liquid the company’s accounts payable are. This metric is important for investors and creditors, as it provides insight into a company’s ability to pay its bills on time.
History of Payables Turnover
The concept of payables turnover has been around since the early days of accounting. It was first used by merchants to measure the liquidity of their accounts payable. Over time, the concept has evolved and is now used by investors and creditors to assess the financial health of a company. The metric is also used by analysts to compare the liquidity of different companies in the same industry.
Comparison Table
| Company | Payables Turnover |
|---|---|
| Company A | 2.5 |
| Company B | 3.2 |
| Company C | 4.1 |
Summary
Payables turnover is an important financial metric used to measure the liquidity of a company’s accounts payable. It is calculated by dividing the total amount of accounts payable by the average amount of accounts payable over a given period of time. The higher the turnover rate, the more liquid the company’s accounts payable are. This metric is important for investors and creditors, as it provides insight into a company’s ability to pay its bills on time. For more information about payables turnover, you can visit websites such as Investopedia and The Balance.
See Also
- Accounts Payable
- Accounts Receivable
- Cash Flow
- Working Capital
- Liquidity Ratio
- Current Ratio
- Quick Ratio
- Debt-to-Equity Ratio
- Return on Assets
- Return on Equity
