What is good payable turnover ratio?

What is good payable turnover ratio?

As with most financial metrics, a company’s turnover ratio is best examined relative to similar companies in its industry. For example, a company’s payables turnover ratio of two will be more concerning if virtually all of its competitors have a ratio of at least four.

Is a high AP turnover ratio good?

A high AP turnover ratio shows suppliers and creditors that the company has the working capital to pay its bills frequently and can be used to negotiate favorable credit terms in the future. Essentially, a high accounts payable turnover ratio indicates high creditworthiness.

What does a low AP turnover mean?

A Decreasing AP Turnover Ratio A decreasing turnover ratio indicates that a company is taking longer to pay off its suppliers than in previous periods. The rate at which a company pays its debts could provide an indication of the company’s financial condition.

Do you want a high or low accounts receivable turnover?

What Is a Good Accounts Receivable Turnover Ratio? Generally speaking, a higher number is better. It means that your customers are paying on time and your company is good at collecting.

Is a decrease in accounts payable good?

If a company’s AP decreases, it means the company is paying on its prior period debts at a faster rate than it is purchasing new items on credit. Accounts payable management is critical in managing a business’s cash flow.