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Question : -------------------ratio indicates the relationship between credit purchases and average trade payables during the year.

Option 1: Trade receivable turnover ratio

Option 2: Trade payable turnover ratio

Option 3: Inventory turnover ratio

Option 4: Current ratio


Team Careers360 9th Jan, 2024
Answer (1)
Team Careers360 25th Jan, 2024

Correct Answer: Trade payable turnover ratio


Solution : Answer = Trade payable turnover ratio.

Trade payable turnover ratio = $\frac{\text{Net credit purchases}}{\text{Average trade payables}}$.

The trade payable turnover ratio evaluates the efficiency of paying suppliers by dividing credit purchases by the average trade payables. Higher ratios suggest prompt payment, while lower ratios imply delays.
Hence, the correct option is 2.

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