Overview
The accounts payable turnover ratio, sometimes called creditor’s turnover ratio or payable turnover, measures how many times a company pays its creditors over an accounting period. It is a ratio that measures short-term liquidity, with a higher ratio being more favorable to a lower ratio. Calculating the turnover ratio is of particular interest for creditors as they measure a company's ability to meet their obligations. The formula for calculating the ratio is as follows: Accounts Payable Turnover Ratio = Net Credit Purchases / Average Accounts Payable Sometimes, cost of goods sold (COGS) is used in the numerator instead of net credit purchases.

### How to Use the Excel Template

This model is for beginners who are looking to learn more about the A/P turnover ratio, and who want to teach themselves based on an example. It is a simple tool which requires the user to input the following information:
• Annual sales on credit
• Amount of product returns
• Accounts payable, beginning of year
• Accounts payable, end of year
Once these are all entered into the model, it will generate the payable turnover ratio and payable turnover in days based on the inputs.

### Learn More About A/P Turnover Ratio

Read CFI's comprehension guide to learn more about the formula, use, and examples of the ratio!
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