Question : -------------------ratio indicates the relationship between credit purchases and average trade payables during the year.
Option 1: Trade receivable turnover ratio
Option 2: Trade payable turnover ratio
Option 3: Inventory turnover ratio
Option 4: Current ratio
Correct Answer: Trade payable turnover ratio
Solution : Answer = Trade payable turnover ratio. Trade payable turnover ratio = $\frac{\text{Net credit purchases}}{\text{Average trade payables}}$.
The trade payable turnover ratio evaluates the efficiency of paying suppliers by dividing credit purchases by the average trade payables. Higher ratios suggest prompt payment, while lower ratios imply delays. Hence, the correct option is 2.
Question : ------------------- ratio indicates the relationship between credit revenue from Operations and average trade receivables during the year.
Question : -----------------ratio indicates the relationship between the cost of revenue from operations (i.e., Cost of Goods Sold) during the year and average inventory kept during that year.
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