Accounts Payable (AP) Turnover Ratio Formula & Calculation. Thus, ABC's accounts payable turned over 8.9 times during the past year. To calculate average accounts payable, divide the sum of accounts payable at the beginning and at the end of the period by 2. Accounts payable turnover is usually calculated as: Payables Turnover. The formula for accounts payable turnover ratio can be derived by dividing the total purchases during a period by the average accounts payable. Sample Accounts Payable Turnover Ratio. The payable turnover ratio is most commonly calculated on an annual basis, using the following formula: A/P Turnover Ratio = Total Supplier Purchases / Average Accounts Payable Only supplier purchases on account are included in this ratio, since cash purchases don’t contribute to a company’s payables. First, the team needs to compute the average accounts payable. Formula. This figure should include your total credit sales, minus any returns or allowances. Based on this information, the controller calculates the accounts payable turnover as: \$7,500,000 Purchases ÷ ((\$800,000 Beginning payables + \$884,000 Ending payables) / 2) = \$7,500,000 Purchases ÷ \$842,000 Average accounts payable = 8.9 Accounts payable turnover. Similar to most liquidity ratios, a high accounts payable turnover ratio is more desirable than a low AP turnover ratio because it indicates that a company quickly pays its debts. The total for credit purchases over the year was \$875,000. You should be able to find it in the annual reports of the company. Accounts payable turnover rates are typically calculated by measuring the average number of days that an amount due to a creditor remains unpaid. Account Payable Turnover Ratio = Total purchases/Average Accounts Payable. Mathematically, it is represented as, Accounts Payable Turnover Ratio = Total Purchases / Average Accounts Payable. The Payable Turnover Ratio is used in accounting to determine how well a company is paying its suppliers. The formula to figure this is (\$200,000 + \$205,000) / 2, so the average accounts payable is \$202,500. Dividing that average number by 365 yields the accounts payable turnover ratio. =. Average Accounts Payable. The company recorded \$14,750 for accounts payable at the beginning of the year, and \$21,854 at the end. Account Payable Turnover Ratio Formula Payable Turnover Ratio = Total supplier purchases / Average Accounts Payable Note: Average Accounts Payable is calculated by the following: ((Beginning Accounts Payable + Ending Accounts Payable) / 2) What is Payables Turnover Ratio? Accounts Payable Turnover Ratio Formula AP\: Turnover = \dfrac{Net\: Credit\: Purchases}{Average\: Accounts\: Payable} The figure for net credit purchases is often not very easy to discover because such information is not always available in the financial statements. Net Credit Purchases. Payable Turnover in Days = 365 ÷ Payable Turnover Ratio. An accounts payable turnover days formula is a simple next step. The first part of the accounts receivable turnover ratio formula calls for your net credit sales, or in other words, all of your sales for the year that were made on credit (as opposed to cash). 365 days per year / 5 times per year = 73 days Slightly different methods are applied to calculate A/P days, A/P turnover ratio in days, and other important metrics. Accounts payable turnover ratio formula can be calculated by dividing the total purchases by average accounts payable for the year. Last year’s beginning accounts payable balance was \$200,000 and the ending balance was \$205,000. Accounts payable turnover is the number of times a company pays off its vendor debts within a certain timeframe. 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