EM3084 | Examining Accounts: Business Ratios: Creditors to Purchases

It is possible to work out a similar ratio for creditors as that for debtors using the formula below:

• Closing Creditors / Annual Credit Purchases X 365

This gives the number of days purchases which are unpaid at the year end. From the accounts supplied you would not be able to work out cash purchases and this will distort the ratio.

How does the ratio compare with the debtors ratio? Is this the sort of trade where there is likely to be a marked difference between the terms given by suppliers and those expected from customers?

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)