Question : Trade Payables Turnover Ratio could be converted into_______________which indicates the period which is normally taken by the firm to make payment to its trade payable
Option 1: Debt collection period
Option 2: Average collection period
Option 3: Average age of payments
Option 4: None of the above
Answer (1)
24th Jan, 2024
Correct Answer: Average age of payments
Solution :
Answer =
Average age of payments
Average age of payment= $\frac{\text{Months or days in a year}}{\text{ Trade payable turnover ratio}}$.
Trade Payable Turnover Ratio could be converted into Average Payment Period which indicates the period which is normally taken by the firm to make Payment to its Trade Payable.
Hence, the correct option is 3.
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