In 2012,Toys 4 U had a trade payables turnover ratio of 6.08; in 2011,5.87; and 5.45 in 2010.Which statement is true about what the ratios indicate?
A)Toys 4 U is taking longer to pay its vendors in 2012 versus 2011.
B)Toys 4 U is taking less time to pay vendors in 2012 than it took in both 2011 and 2010.
C)Toys 4 U has been increasing its average payables at a faster rate than its cost of goods sold has increased.
D)Toys 4 U is taking less time to collect from its customers.

Question

Quizplus · Accepted Answer

The trade payables turnover ratio measures how quickly a company pays its vendors. A higher ratio indicates that a company is paying its vendors more quickly. Therefore, Toys 4 U is taking less time to pay its vendors in 2012 than it took in both 2011 and 2010, as the ratio increased over those years.

In 2012,Toys 4 U Had a Trade Payables Turnover Ratio