![]() ![]() It reflects the speed at which short-term debt is paid to a company by its customers. It measures the rate at which a company collects the money owed by customers. The accounts receivable turnover ratio is the opposite of accounts payable turnover ratio. The Difference Between the Accounts Payable Turnover and Accounts Receivable Turnover Ratios This formula can be used in calculating the turnover ratio for all available companies. (average accounts payable is calculated by subtracting the payable balance at the beginning of the period from the accounts payable balance at the end of the period). The turnover ratio for the company would be calculated using If Company A buys inventory from a vendor for the past year and the inventory worths $150 million after the accounts payable at the beginning of the year and at the end of the year is calculated. An Increasing turnover ratio might not necessarily mean that the company is solvent, it could be that the company is not reinvesting in its business.Įxample of the Accounts Payable Turnover Ratio.Having a decreasing turnover ratio does not necessary mean the company does not have the financial capacity to pay debts, rather, the company may be reinvesting in the business.The turnover ratio also indicates the number of times the company pays it debts in a given period. ![]()
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