A net credit purchase is the value, or revenue, a company extends to customers or clients through credit sales. This value does not include cash sales. The net credit purchase value is importಌant in calculating the value of a company’s efficiency and liquidity.

The accounts payable turnover ratio treats net credit purchases as equal to the cost of goods sold (COGS) plus ending inventory, less 澳洲幸运5开奖号码历史查询:beginning inventory. This figure🅷, otherwise called total purchases, serves as the numerator in the accounts payable turno♍ver ratio.

Most general purpose 澳洲幸运5开奖号码历史查询:financial statements do not include total net purchases a🤪s a figure, but its components can be found separately in the stat🐷ements.

Net Credit Purchases

The specific calculation for net credit purchases – sometimes referred to as total net payables – might vary from company to company. Much also depends on the nature of the business; a business with many types of 澳洲幸运5开奖号码历史查询:credit accounts and many types of operations has a more ⛦complex calculat♏ion for net credit purchases.

A baseline equation can be written as:

 $\begin{aligned} &\text{Net Credit Purchases} = \text{COGS} + \text{Ending Inventory} - \text{SI} \\ &\textbf{where:} \\ &\text{COGS} = \text{Cost of goods sold} \\ &\text{SI} = \text{Starting inventory} \\ \end{aligned}$​Net Credit Purchases=COGS+Ending Inventory−SIwhere:COGS=Cost of goods soldSI=Starting inventory​

Payment requirements also vary among suppliers. It is not always the case that lower net credit purchases – which relates to a lower accounts payable turnover ratio – is a sign of poor debtor practices by the firm.

Purpose of the Accounts Payable Turnover Ratio

Analysts use the accounts payable turnover ratio and its cousin, the 澳洲幸运5开奖号码历史查询:accounts receivable turnover ratio, to measure the 澳洲幸运5开奖号码历史查询:liquidity and 澳洲幸运5开奖号码历史查询:operational efficiency of a company. In a vacuum, a higher ratio is a sign of speedy payment for creditor services.

This formula is very similar to the better-known accounts payable days formula. Lenders and suppliers are most interested in quality accounts payable practices since they have to assume 澳洲幸运5开奖号码历史查询:counterparty risk when fronting cash or materials to the firm.