CUET CUET Accountancy 2024 - Calculate Trade Payables Turnover Ratio. | PYQs + Solutions

CUET Accountancy 2024

Accountancy

Accounting Ratios

Easy

Calculate Trade Payables Turnover Ratio.

29.6 times

2.96 times

29.60%

2.69 : 1

Correct Option: 2

\text{Trade Payables Turnover Ratio} = \frac{\text{Credit Purchases}}{\text{Average Trade Payables}} = \frac{4,20,000}{1,42,000} = 2.96 \text{ times}

This ratio shows how many times a company pays off its suppliers during a year. A higher ratio means the company is paying its dues more frequently.

Note 1: Since there’s no information about cash purchases, we assume all purchases are on credit.

Note 2: We don't have opening balances for creditors or bills payable, so we use the year-end figures as the average.

\text{Average Trade Payables} = \text{Bills Payables} + \text{Trade Creditors} = 52,000 + 90,000 = 1,42,000

This ratio helps understand how quickly the company is clearing its dues to suppliers. It is always shown in times, not in percentage.