CUET UG 2024 — Accountancy Financial Statements

$$\text{Trade Payables Turnover Ratio} = \frac{\text{Credit Purchases}}{\text{Average Trade Payables}} = \frac{4,20,000}{1,42,000} = 2.96 \text{ times}$$Trade Payables Turnover Ratio=Average Trade PayablesCredit Purchases​=1,42,0004,20,000​=2.96 times

This ratio shows how many times a company pays off its suppliers during a year. A higher ratio means the company is paying its dues more frequently.

Note 1: Since there’s no information about cash purchases, we assume all purchases are on credit.

Note 2: We don't have opening balances for creditors or bills payable, so we use the year-end figures as the average.

$$\text{Average Trade Payables} = \text{Bills Payables} + \text{Trade Creditors} = 52,000 + 90,000 = 1,42,000$$Average Trade Payables=Bills Payables+Trade Creditors=52,000+90,000=1,42,000

This ratio helps understand how quickly the company is clearing its dues to suppliers. It is always shown in times, not in percentage.