creditors payment period ratiocreditors payment

Question

Creditors Payment Period Ratio

Creditors payment period =   365/ Creditors turnover

                                          = (365 x Average creditors)/Annual credit purchases

• The ratio signify the credit period granted via the suppliers that is the period
• Within that the firm should pay its liabilities to the suppliers.
• The shorter the duration the higher the creditors turnover and vice-versa.