Days Payable Outstanding

Days Payable Outstanding, also known as Days Payable, is the accounts payable turnover expressed in days (accounts payable outstanding in days).

Days Payable Outstanding

Days Payable Outstanding, also known as Days Payable, is the accounts payable turnover expressed in days (accounts payable outstanding in days).


Days Payable Outstanding Formula

The formula for annualized Days Payable Outstanding (DPO) is:

Tthe DPO is generally calculated on a quarterly and yearly basis. 

Interpretation of Days Payable Outstanding

Having fewer days of payables on the books than competitors means some are getting better credit deals than others. If a company is buying from a customer and looks at its days receivable, that company doesn't need to give them any shorter to pay them. Businessmen look at a range of competitors' days payable oustanding  in order to establish benchmarks and maximize profits.

Having a greater days payables outstanding may indicate the company's ability to delay payment and conserve cash. This could arise from better terms with vendors. The Days Payable Outstanding also shows how long a company can make interest on the money made.
 

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