Inflation risk and Payables days: Difference between pages
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'' | ''Financial ratio analysis - management efficiency ratios.'' | ||
Payables days 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 payables days are: | |||
(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 Days payables outstanding. | |||
== See also == | == See also == | ||
* [[ | * [[Creditors]] | ||
* [[ | * [[Debtor days]] | ||
* [[ | * [[Management efficiency ratio]] | ||
* [[ | * [[Payables management]] | ||
[[Category:Accounting,_tax_and_regulation]] | |||
[[Category:The_business_context]] | [[Category:The_business_context]] | ||
Latest revision as of 11:18, 6 February 2019
Financial ratio analysis - management efficiency ratios.
Payables days 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 payables days are:
(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 Days payables outstanding.
