Creditor's turnover ratio is also called ______
The creditor's turnover ratio is also called the credit velocity ratio.
The creditors turnover ratio indicates the relation between net credit purchase and average accounts payable of the year. This ratio is also known as Creditors' Velocity.
Creditors Turnover Ratio = Net Credit Purchase/Average Accounts Payables
Where Average Accounts Payables = [Opening Creditors and B/P + Closing Creditors and B/P]/2
Credit Purchase = Total Purchase – Cash Purchase – Return Outward
This ratio indicates the payment period of the concern. The lower the ratio better is the liquidity position of the firm and the higher the ratios, the lesser the liquid position of the firm.