Accounts Payable Ratio

The Accounts Payable Ratio widget provides a comprehensive measure of account payable ratio.

This determines the number of times the company does the payments (accounts payable) to the suppliers during a specific duration. For a company, accounts payable turnover ratio is a key indicator of the company liquidity.

The accounts payable turnover ratio (creditor turnover ratio) is calculated based on the numerical values of the financial statements. A higher ratio indicates that the company can pay the creditors in a short time and the effectiveness in handling the credits.

Account Payable Ratio calculation

Accounts Payable Turnover Ratio = Net Credit Purchases / Average Account Payable

Average Account Payable = (Opening balance of Accounts Payable + Closing balance of Account Payable) / 2
Note: Cost of Goods Sold (COGS) can be used instead of Net Credit Purchases to calculate the Accounts Payable Turnover Ratio.

For example

Company A reported the annual purchases on credit of $123,555 and returns of $10,000 for the year end. Accounts payable at the beginning (opening balance) as $12,555 and end (closing balance) as $25,121. The calculation of the Accounts Payable Turnover Ratio:

Net Credit Purchases = $123,555 - $10,000 = $113555

Average Account Payable = ($12,555 + $25,121) / 2 = $ 18,838

Accounts Payable Turnover Ratio = $113555/$ 18,838 = 6.03

The widget retrieves information from the Taxonomies (tfgld1170m000) and tfgld1670m000 session in Infor LN to calculate the accounts payable turnover ratio. The Taxonomies (tfgld1670m000) session in Infor LN is used to map the accounts for this widget. The widget displays a graphical representation based on the calculated value for the selected period.
Note: 
  • You can select the Include Non-Finalized Transaction check box on the Configure Widget screen in the Selection widget to include the amounts that are not finalized.
  • The GAAP (Generally Accepted Accounting Principles) or IFRS (International Financial Reporting Standards) accounting rules are applied.
On the widget, you can:
  • View the Company name.
  • Click on the Company name to view the details of the widget configuration.
  • Click Dropdown to modify the period. A line graph displays a monthly payable ratio for the fiscal year if YTD option is selected. A bar chart displays the payable ratio for the selected month and previous month if the MTD option is selected.
  • Rest the pointer on the graph to view the exact value.