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Answer: 9
The payables turnover ratio is calculated as Purchases divided by Average Trade Payables. Here, Cost of Sales is used as a proxy for Purchases. The calculation is as follows: \[ \text{Payables Turnover} = \frac{\text{Cost of Sales}}{\text{Average Trade Payables}} = \frac{1,800}{(180 + 220) / 2} = \frac{1,800}{200} = 9 \] - **Option A (9)** is correct because it accurately uses the average trade payables and cost of sales. - **Option B (10)** is incorrect because it uses the ending accounts payable instead of the average. - **Option C (12)** is incorrect because it incorrectly uses revenue instead of cost of sales in the numerator. This ratio measures how efficiently a company pays its suppliers, with higher values indicating more frequent payments. The assumption is that all purchases are made on credit.
Author: LeetQuiz Editorial Team
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An analyst collects the following financial data (in € thousands) for a company: Year 2 Year 1 Revenue 2,400 2,000 Cost of sales 1,800 1,400 Ending accounts payable 180 220 Based solely on this information, the payables turnover ratio for Year 2 is closest to:
A
9
B
10
C
12
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