Net profit margin and Payables days: Difference between pages
From ACT Wiki
(Difference between pages)
imported>Doug Williamson (Add header.) |
imported>Doug Williamson (Correct spelling.) |
||
| Line 1: | Line 1: | ||
''Financial ratio analysis.'' | ''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. | |||
==See also== | 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 == | |||
* [[Creditors]] | |||
* [[Debtor days]] | |||
* [[Management efficiency ratio]] | |||
* [[Payables management]] | |||
[[Category:Accounting,_tax_and_regulation]] | [[Category:Accounting,_tax_and_regulation]] | ||
[[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.
