Days payables outstanding: Difference between revisions

From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson
(Add example.)
imported>Doug Williamson
(Expand definition.)
Line 4: Line 4:


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




Line 17: Line 19:




Also known as Creditor days.
Also known as Creditor days or Payables days.





Revision as of 18:17, 3 February 2019

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.

Payables days 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 * 365 = 45.6 days


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


Also known as Creditor days or Payables days.


See also