Accounts payable turnover:
A) Describes how much time it takes a company to meet its obligations to suppliers.
B) Is also called inventory turnover.
C) Can be used to evaluate liquidity.
D) Describes how much time it takes a company to meet its obligations to suppliers and can be used to evaluate liquidity.
E) All of these answers are correct.

Question

Quizplus · Accepted Answer

Accounts payable turnover measures how efficiently a company pays its suppliers and is a measure of liquidity. It is calculated by dividing the total purchases by the average accounts payable balance during a period. Therefore, option D is the correct answer. Option A is partially correct, but it doesn't provide a comprehensive explanation. Option B is incorrect because inventory turnover is a completely different ratio used to measure inventory efficiency. Option C is partially correct, but it doesn't capture the full picture of what accounts payable turnover measures. Option E is incorrect because option B is wrong.

Accounts Payable Turnover