A business with a payables turnover ratio of 10.4 times a year would have an average payable period of about:
A) 3 days.
B) 30 days.
C) 35 days.
D) 62 days.

Question

Quizplus · Accepted Answer

Payables turnover ratio = Cost of goods sold / Average accounts payable

10.4 times a year = Cost of goods sold / Average accounts payable

Therefore, Average accounts payable = Cost of goods sold / 10.4

Assuming a 365-day year, the average payable period would be:

Average payable period = 365 / Payables turnover ratio

Average payable period = 365 / 10.4

Average payable period = 35.09 days (rounded to 35 days)

A Business with a Payables Turnover Ratio of 10