Days payables outstanding

From ACT Wiki
Jump to navigationJump to search
The printable version is no longer supported and may have rendering errors. Please update your browser bookmarks and please use the default browser print function instead.

Financial ratio analysis - management efficiency ratios.

(DPO).

Days payables outstanding are a working capital management ratio calculated by dividing accounts payable outstanding at the end of a time period by the average daily credit purchases for the period.

DPO measures the average number of days taken to pay trade suppliers.


For example: a company has an average of £50,000 of payables over a year in which the cost of goods sold was £400,000.

The DPO is:

(50,000 / 400,000) x 365

= 45.6 days


A higher number is generally perceived as better, but a business needs to maintain the goodwill of its suppliers and shorter payment terms may therefore be necessary.


Also known as Creditor days or Payables days.


See also