Answer: taking advantage of lenient supplier terms.

## Explanation The payables turnover ratio measures how quickly a company pays its suppliers. The formula is: **Payables Turnover = Cost of Goods Sold / Average Accounts Payable** A **lower** payables turnover ratio indicates that the company is taking longer to pay its suppliers compared to its peers. This means the company is: 1. **Taking advantage of lenient supplier terms** - Suppliers are allowing the company to take more time to pay 2. **Effectively using trade credit** as a source of short-term financing 3. **Not paying early** (which would increase the turnover ratio) Let's analyze each option: **A. Utilizing early payment discounts** - ❌ **Incorrect** - Early payment discounts encourage companies to pay suppliers quickly - This would result in a **higher** payables turnover ratio, not lower **B. Taking advantage of lenient supplier terms** - ✅ **Correct** - Lenient supplier terms allow longer payment periods - This results in a **lower** payables turnover ratio - The company is effectively using supplier financing **C. Receiving payments from customers faster than its peers** - ❌ **Incorrect** - This relates to **receivables turnover**, not payables turnover - Receivables turnover measures how quickly customers pay the company - Payables turnover measures how quickly the company pays its suppliers **Key takeaway**: A lower payables turnover ratio indicates the company is taking longer to pay suppliers, which could be due to: - Negotiated longer payment terms - Using trade credit as financing - Not taking advantage of early payment discounts

Author: LeetQuiz .