Numbers of Days Payable

CFA Level I Corporate Finance
#1

Hello,

There is something I don’t understand. - When you look at “Numbers of Days Payable” in Volume 3 - Financial Analysis - page 321 it says:

Numbers of Days Payable = Number of days in period / Paybles turnover

  • When you look at “Numbers of Days Payable” in Volume 4 - Corporate Finance - page 140 it says:

Numbers of Days Payable = Account Paybles / (Purchases/ 365)

Can someone explain that to me please? Thanks a lot for your help.

#2

Basically, they just combined the formula.

Payables turnover = (Purchases)/Average Payables

No. of Days Payable = 365/Payables Turnover

or

365/(Purchases/Average Payables) = 365 * (Average Payables/Purchases) = AP/Purchases ÷ 1/365 = AP/(Purchases/365)

You get the convoluted idea.

#3

NDP=AP/(P/365) If you open the bracket you’ll get NDP=AP÷P/365 =AP×365/P =365×AP/P But payable turnover= P/AP so NDP=365×(1/PT) NDP=365/PT you can see both formula are the same. NDP= number of days payable AP = average payable P = purchase PT = payable turnover I do hope you get it

#4

Great! Thanks a lot to both of you!

#5

You’re welcome~

#6

You are welcome