| |
|
|
Click Ratio Name For More Information
|
Cost Of Sales By Payables
What it measures
This ratio measure how often trade payables
are turned during the year. The higher the turns, the shorter time period
between your purchase and payment to the vendor. If the ratio is too high,
this could indicate that the company is having problems paying its bills (cash
shortages) or could have extended terms with the vendor.
How is the ratio calculated
Divide the cost of sales for the year by the
accounts payable value. For example, if you are 8 months into your year
and have a cost of sales of 1,000,000 with an accounts payable balance of
110,000 then the ratio is calculated
(1,000,000 / 8) * 12
---------------------
= 13.63
110,000
Target
The target for the Cost of Sales / Payables
ratio is 12.60
How to improve the ratio
Make sure that payments to your vendors are
in a timely manner and within your terms.
|
| |
