December 17, 2009 
This entry was posted on Thursday, December 17th, 2009 at 8:29 pm and is filed under Accounting, Accounts Payable, How To. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
Measure short term liquidity for goods and services when suppliers only allow short payment periods that are usually within 30-90 business days. Use the Accounts Payable Turnover (APT) ratio to compute the length of time needed for your company to repay your suppliers. The payment period is dependent on factors such as the industry norm, relative size of the supplier to that of the company, and the financial condition of the supplier.
The APT ratio determines the financial stability of a company with good accuracy. A high APT ratio means that the company in question can produce cash fast. If this figure is low, it implies that the company has serious cash flow trouble.