Accounts Demystified, 7e by Anthony Rice

Author:Anthony Rice [Rice, Anthony]
Language: eng
Format: epub
ISBN: 9781292084879
Publisher: Pearson Education Limited
Published: 2015-09-17T16:00:00+00:00

Trade creditor productivity

The trade creditor productivity (again calculated as sales divided by trade creditors) has risen over the five-year period [Figure 8.11].

Figure 8.11 Wingate’s trade creditor productivity

This is not good, however, from the point of view of getting a high return on capital. Creditors reduce working capital. Hence we want creditor productivity to be as low as possible. This chart suggests that Wingate has been paying creditors more quickly than it used to. This is probably to get better prices but it may be that the finance department just hasn’t been trying hard enough!

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