Question

Tortoise Inc. Had a cost of goods sold of $43,821. At the end of the year, accounts payable balance was $7,843 . How long on average did it take the company to pay off its suppliers during the year ? what might a large value for this ratio imply ?

Answer 1

Answer:

The turnover = Cost of goods sold / Account payable  

       = 43,821 / 7,843 = 5,59 times

Average suppliers pay off = 365/5,59 = 65,2 ~ 66 days

Explanation:

Roughly speaking, a large value for this ratio imply that T.I might take a lot of time to pay.