Question

Creditors turnover ratio includes:

• A. Total credit purchase
• B. Total credit sales
• C. Total cash sales
• D. Total cash purchase

Hint:

Creditors turnover ratio = Net credit purchases ÷ Average creditors.

Answer 1

The Correct Option is A

Step 1: Formula.
\[ \text{Creditors Turnover Ratio} = \frac{\text{Net Credit Purchases}}{\text{Average Trade Creditors}} \]
Step 2: Explanation.
The ratio measures how quickly a firm pays its creditors. Therefore, only credit purchases are considered, not cash purchases.
Step 3: Eliminate wrong options.
- Credit sales or cash sales: Related to debtors, not creditors.
- Cash purchase: Not relevant, as no credit is involved.
Step 4: Conclude.
Hence, creditors turnover ratio includes total credit purchases.
Final Answer: \[ \boxed{\text{Total credit purchase}} \]