PAYABLES TURNOVER RATIO
CONDITION
| Year : | 2006 |
| Your ratio : | 14.55 |
| Industry Avg : | 20.9 |
| Cost Of Goods Sold : | $424,970 |
| Trade Payables : | $0 |
| Account Patables : | $29,202 |
GRAPH
PAYABLES TURNOVER RATIO
Payables turnover trends can help a company monitor its cash position. Similar to A/R ratios that determine a company's incoming cash situation, this ratio can highlight the way
a business handles its outgoing payments. Look for trends that indicate a change in your payments habits:
-Compare the calculated days in payables to the terms offered by your suppliers
-Compare to industry standard
-Review an Aging of payables and be familiar with the term offered by your suppliers
-Assure that term discounts are not being ignored
This ratio reveals how quickly your company pays its bills. The payables turnover ratio how often payables turn over during the year. A High ratio means there is a relatively short time between purchase of goods and services and payment for them. A low ratio may be a sign that the company has chronic cash shortages, disputing invoices with suppliers, enjoying extended terms, or deliberately expanding its trade credit.
The perfomance of this ratio versus your peers indicates that you need to improve the timeliness of your bill paying. Continuing to stay in the "orange zone" may impair the company's credit and borrowing capability. Continued late payments over time will impact cash flow and payment terms. Consider discussing your need with your banker or creditor for assistance.