Open market operations and Payables days: Difference between pages

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(OMOs or OMO).
''Financial ratio analysis - management efficiency ratios.''


The buying or selling of financial securities in the open market by a central bank to influence the amount of money in circulation.
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.  


The range of instruments used by central banks has tended to increase following the financial crisis early in the 21st Century.  
Payables days measures the average number of days taken to pay trade suppliers.


For example, the European Central Bank operates through Euro-member states' National Central Banks (NCBs). It lists as available to an NCB "reverse transactions" that are applicable on the basis of repurchase agreements or collateralised loans, outright transactions, issuance of debt certificates, foreign exchange swaps and collection of fixed-term deposits.




In the UK, the Bank of England's Open Market Operations are currently suspended.
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 ==
* [[Bank of England]]
* [[Creditors]]
* [[Central bank]]
* [[Debtor days]]
* [[Monetary policy]]
* [[Management efficiency ratio]]
* [[POMO]]
* [[Payables management]]
 
[[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.


See also