How does receivable/payable turnover work for the first accounting period?

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The formula for payable turnover is

Payable turnover = Cost of sales/Average payable

And the result will be interpreted as the number of times I've paid my creditors, right? For example, if I bought goods of $100 mil (on credit) and on average, my accounts payable were $20 mil, then my payable turnover would be 5. Conventionally, this means that during the period, I've paid my creditors five times. But when we break the formula down for the first accounting period, something strange emerges (at least for me).

Assuming it was the first accounting period, and I had no payable balance brought down (i.e. my opening accounts payable were zero). If I bought goods of $100 mil (again, on credit), and I never paid my creditors during the period, my average inventory would be ($0 + $100 mil)/2 = $50 mil. My payable turnover would then be 2. Using the conventional interpretation, it means that I've paid my creditors twice during the year. But in reality, I've never paid my creditors. Even if we substitute average payable in the formula with closing payable ($100 mil), we still end up with a payable turnover of 1, which still doesn't conform with reality!

Can someone enlighten me on this?
 
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From what i can see in your question above, you are dividing "purchases" with "average inventory".........i believe that is not the correct formula for calculating payable turnover. it should be purchases/average accounts payable.
Also, in this case, you wouldnt divide by 2, since you didnt have opening and closing payables (average payable). Therefore all you have to do is divide 100/100 which gives you 1.....more or less like there is no point of calculating this ratio anyway. Another point is that this is one of the drawbacks of accounting ratio, it makes use of historical data, and where there isnt any historical data, the result might be misleading
 
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From what i can see in your question above, you are dividing "purchases" with "average inventory".........i believe that is not the correct formula for calculating payable turnover. it should be purchases/average accounts payable.
Sorry, I meant average payable.

Another point is that this is one of the drawbacks of accounting ratio, it makes use of historical data, and where there isnt any historical data, the result might be misleading
I particularly agree with you on this.

So can I take it as there is nothing we can do to accurately analyze ratios like this for a business where there was no relevant opening data?
 

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