In addition to days' sales in receivables and days' sales in inventory we could calculate "days' sales in payables" by computing the accounts payable turnover and dividing it into 365 days. In words, what do these ratios tell us?
A) The number of days it takes before the current ratio falls to zero.
B) The number of days of sales needed to make a profit.
C) The time it takes to completely replace total current assets.
D) The rate at which assets are replaced.
E) How long it takes, on average, to entirely deplete these accounts.

Question

Quizplus · Accepted Answer

These ratios essentially measure the average time it takes for a company to turn its receivables into cash (days' sales in receivables), its inventory into sales (days' sales in inventory), and to pay off its obligations (days' sales in payables), thereby depleting these accounts.

In Addition to Days' Sales in Receivables and Days' Sales