Selected financial information for Hewlett-Packard Corporation follows: (in mill
ID: 2417333 • Letter: S
Question
Selected financial information for Hewlett-Packard Corporation follows:
(in millions)
2013
2012
Average accounts payable
$ 13,685
$ 14,050
Year-end accounts payable
14,019
13,350
Sales (products)
72,398
77,887
Cost of goods sold (products)
55,632
59,468
Required:
a. Calculate accounts payable turnover (APT) for 2013 and 2012.
b. In general do companies prefer a higher or a lower APT? Why?
c. Calculate accounts payable days outstanding for both years.
d. What effect does the change in APT have on net cash flows from operating activities?
(in millions)
2013
2012
Average accounts payable
$ 13,685
$ 14,050
Year-end accounts payable
14,019
13,350
Sales (products)
72,398
77,887
Cost of goods sold (products)
55,632
59,468
Explanation / Answer
in millions) 2013 2012 Average accounts payable $ 13,685 $ 14,050 Year-end accounts payable 14,019 13,350 Sales (products) 72,398 77,887 Cost of goods sold (products) 55,632 59,468 1) account payable turnover Ratio= Total Purchases/Average Accounts Payable 4.07 4.23 55632/13685 59468/14050 Ans B Higher ratio is better. Since the accounts payable turnover ratio indicates how quickly a company pays off its vendors,it is used by supplies and creditors to help decide whether or not to grant credit to a business. A higher ratio shows suppliers and creditors that the company pays its bills frequently and regularly. Ans c Accounts Payble Day outstnading=365/Accounts payable turnover Ratio 89.68 86.29 days 365/4.07 365/4.23 Ans d APT measures how quickly a business pays its suppliers. When APT increases than the time it takes for a company to settle up with its suppliers declines. This reduces accounts payable on the balance sheet. Reducing current liabilities is a use of cash, and this decreases cash flows from operations and vice versa
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.