payables turnover ratio

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mnieman

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so can we just use
COGS / avg trade payables
and
purchases / avg. trade payables
interchangeably?
 
Yes.
However COGS and purchases might be different. ie If you purchase more/less inventory than you actually sell.
In those cases I would adjust COGS to purchases and use purchases in calculating the ratio.
 
Payables = Purchases/ Avg. Payables
Inventory= COGS/ Avg. Inventory!!
I wouldnt use them interchangeably for sure!! Numbers would be extremely different!!
 
Most of the time they don’t give you payables - so COGS will suffice.
 
No. You will have to find purchases.
Beginning Inventory + Purchases - COGS = Ending Inventory
I don’t remember doing a question where I had to use COGS in place of purchases because inventory was not given. They can be very different.
 
anish Wrote:
——————————————————-
> No. You will have to find purchases.
>
> Beginning Inventory + Purchases - COGS = Ending
> Inventory
>
> I don’t remember doing a question where I had to
> use COGS in place of purchases because inventory
> was not given. They can be very different.
That is true. I did a couple questions where COGS was replaced because the information provided was no sufficient to calculate purchases. We all know that the correct formula is Purch / Avg A/P.
One mock that I did, they were using COGS for Purchases because of insufficient information.
—
Edit: What I am trying to say is that I have seen COGS being used, and in a case where we aren’t given sufficient info to calculate Purchases — my experience with mocks indicates using COGS… This is more of me trying to provide you guys with a heads up from working through these examples… Nothing more.
 
To add on to my previous message, if you google the formula for Payable Turnover, you will note that some sites have it as Purchases / Avg Payable, and some have it as COGS / Avg Payable.
Accounts Payable Turnover Formula¶
A solid grasp of the accounts payable turnover ratio formula is of utmost importance to any business person. Though some ratios may or may not apply to different business models everyone has bills to pay. The need to understand ap turnover is universal.
Accounts payable turnover = Cost of goods sold / Average accounts payable
Or = Credit purchases / average accounts payable.
Purchases = Cost of goods sold + ending inventory - beginning inventory.
Compliments of:
http://www.wikicfo.com/Wiki/Default.aspx?Page=Accounts%20Payable%20Turno...
 
yeah the question in this CFAI mock made us use COGS. oh well
 
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