Landseeker's Restaurants reported cost of goods sold of $322 million and accounts payable of $84 million for 2015. In 2014, cost of goods sold was $258 million and accounts payable was $72 million. Landseeker's accounts payable turnover ratio in 2015 is closest to:

Question

Quizplus · Accepted Answer

The accounts payable turnover ratio is calculated as follows:

Accounts Payable Turnover Ratio = Cost of Goods Sold / Average Accounts Payable

To find the average accounts payable, we add the accounts payable at the beginning of the year to the accounts payable at the end of the year and divide the sum by 2.

Average Accounts Payable = (Accounts Payable at Beginning of Year + Accounts Payable at End of Year) / 2

For 2015:

Average Accounts Payable = ($72 million + $84 million) / 2 = $78 million
Accounts Payable Turnover Ratio = $322 million / $78 million = 4.13

Therefore, the closest answer is B) 4.13.

Landseeker's Restaurants Reported Cost of Goods Sold of $322 Million