Days of Payable Outstanding is a measurement of how long a company takes to pay its suppliers.
It can also be used as a measurement of how long a company holds onto its cash.
Days of Payables Outstanding = Accounts Payable / (Cost of Sales / 365)
A company has accounts payable of $3,200 and cost of sales of $13,000.
Days of Payables Outstanding = $3,200 / ($13,000 / 365) = $3,200 / $35.616 = 89.85
Therefore, this company has 89.9 days of payables outstanding.
- Wikipedia – Days Payables Outstanding – The days payable outstanding formula.
- Accounting Tools – Days payable outstanding – A quick writeup of days payable.
- YCharts – Days Payable Outstanding – The formula for days payable outstanding.
- Investopedia – Days Payable Outstanding – DPO – An example calculation and the formula for DPO.