GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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What does creditors turnover ratio take into account?
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Total cash sales
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Total credit sales
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Total credit purchase
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Total cash purchases
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Explanation:
Detailed explanation-1: -It is an activity ratio that finds out the relationship between net credit purchases and average trade payables of a business. It finds out how efficiently the assets are employed by a firm and indicates the average speed with which the payments are made to the trade creditors.
Detailed explanation-2: -It is calculated by the formula:(trade creditors × 365)/annual purchases on credit. (trade creditors × 365)/annual purchases on credit.
Detailed explanation-3: -Again creditors turnover ratio has great importance. It calculates the velocity with which creditors are paid off during the year.
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