e a i Days payable outstanding (DPO) is an efficiency ratio that measures the average number of days a company takes to pay its suppliers.

n DPO provides one measure of how long a business holds onto its cash.

y a DPO can also be used to compare one company's payment policies to another. s Days payable outstanding is a great measure of how much time a company takes to pay off its vendors and suppliers.

Having a greater days payables outstanding may indicate the Company's ability to delay payment and conserve cash. When combined these three measurements tell us how long (in days) between a cash payment to a vendor into a cash receipt from a customer. d O r n This could arise from better terms with vendors. average number of days a company takes to pay invoices from suppliers and vendors Basic Instruments of Working Capital Management, https://en.wikipedia.org/w/index.php?title=Days_payable_outstanding&oldid=768717562, Creative Commons Attribution-ShareAlike License, This page was last edited on 5 March 2017, at 11:11. g P Having fewer days of payables on the books than your competitors means they are getting better credit terms from their vendors than you are from yours. This is useful because it indicates how much cash a business must have to sustain itself. Days payable outstanding (DPO) is an efficiency ratio that measures the average number of days a company takes to pay its suppliers.

/ P {\displaystyle DPO={\dfrac {ending~A/P}{Purchase/day}}}, where ending A/P is the accounts payable balance at the end of the accounting period being considered and Purchase/day is calculated by dividing the total cost of goods sold per year by 365 days.[1].

A = If a company is selling something to a customer, they can use that customer's DPO to judge when the customer will pay (and thus what payment terms to offer or expect).  

D / If you look at the formula, you would see that DPO is calculated by dividing the total (ending or average) accounts payable by the money paid per day (or per quarter or per month). d e u DPO is also a critical part of the "Cash Cycle", which measures DPO and the related Days Sales Outstanding and Days In Inventory. P After-Tax Payable Period: The average period that a company has between receiving goods and paying its suppliers for the goods, utilizing after-tax accounts payable … c


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