Weighted average cost of capital (WACC)

CALCULATION:

Divide the total purchases by the average accounts payable for the year. To calculate total purchases add the ending inventory to the cost of goods sold and subtract the beginning inventory.

INTERPRETATION

The accounts payable turnover ratio shows how many times a company can pay off its average accounts payable balance during the course of a year

Benchmark: EP HA

M&M company purchased $1,000,000 worth of construction materials from his suppliers. According to the balance sheet, the beginning accounts payable was $55,000 and the ending accounts payable was $958,000.
Accounts Payable Turnover Ratio = $1,000,000 / ($55,000 + $958,000/ 2) = 1.97
A 1.97 ratio means that M&M pays their suppliers back on average once every six months of twice a year

Accounts Payable Turnover Ratio

Accounts Payable Turnover Ratio =

Total supplier purchases

Average accounts payable

Accounts Payable Turnover Ratio: