Accounts Payable Days Formula And Ratio
It is the ratio of N et Credit Purchases to Average Accounts Payable divided into 365 days. Accounts Payable Days Formula shows how many days a company takes to pay its bill or debts to suppliers or creditors during the accounting cycle. If a company takes too much time to pay to its suppliers, then Accounts Payable Days Ratio is not good for that company and creditors and suppliers hesitate to give loans or make purchase agreement with that company. The formula to calculate Accounts Payable Days is shown below: 365 / ( N et Credit Purchases / Average Accounts Payable) Here Average Accounts Payable is calculated as shown below: Opening Accounts Payable + Closing Accounts Payable / 2 For Example, if the N et Credit Purchases is Rs. 70000, Average Accounts Payable is Rs. 600000, then what is Accounts Payable Days? Putting the value in the above formula of Payable Days, we get: 365 / (500000 / 600000) = 365 / .833 = 438 Days ...