Accounts payable are financial liabilities, due for repayment

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2019-02-07 22:00:29

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The Population of Western Europe to a greater extent than our compatriots are familiar with this form of loan as the loan. Credit policy of any state indicates the presence in the country stand firmly on his feet financial and credit institutions, which help maintain the balance between the needs of different categories of citizens and the demand for products of domestic enterprises.

For reasons of fairness it is worth noting that our credit institutions are in the growth stage, but today still do not reach the same value of the Western structures. This is manifested in not-so-flexible credit system provincial regions compared to Metropolitan areas and large cities. The loan terms often do not correspond to the depth of the purse of the average citizen, who came from the working class. Also catches the eye of a small selection of terms of the loan, so the purchase of, say, a car or apartment with the help of a loan becomes unlikely, and for those who have dared to take such a loan, it becomes in the near future into debt.

For anyone who decided to take this step, the accounts payable is the fact that also not optimistic, because the funds usually have to return for a long time. For large enterprises, accounts payable is a fat minus in the column of the balance sheet. The increase in accounts payable, indicative of the continuous growth of the loan significantly reduces the financial stability of the company. Despite the fact that there are available funds, which usually are under target financing of separate projects, or closing other running debts, we should not forget that these material resources are the stamp of borrowed funds, and it instantly generates the new payment obligations.

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From the point of view of economic theory that accounts payable are engaged by the organisation on the temporary use of cash during a specified period shall be returned on the designated percentage for their use, to persons from whom they were borrowed. There are several other definitions, according to which accounts payable is the liabilities that represent debt payable to others (creditors). Regardless of the various currents of economic science, the essence of the term "accounts payable" in relation to business entities, as well as to individuals remains unchanged.

To assess the credit activities of enterprises are often used such indicators as the ratio of payables and receivables turnover ratio. Because this type of debt is repayable loan, more attention is commonly paid to the second indicator. In General, the ratio of accounts payable turnover is a measure of financial performance calculated by the ratio of cost of goods sold to the average for the year value of outstanding loans. The higher value of this indicator suggests that the company has financial strength in the form of tangible assets, which allows it to quickly make calculations with its suppliers.

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