How to Calculate Days Payable

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Part of the video series: Business Accounting

Summary: Calculating days payable can be done by dividing the accounts payable by the purchases for the period, or it can be done by dividing accounts payable by the cost of goods sold. Determine how well a company uses working capital with information from a certified public accountant in this free video on accounting.

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By Miranda Chook
eHow Presenter

Miranda Chook is a CPA with expertise in international operations. She has held executive positions with both publicly listed and privately held companies. In addition to her finance...read more

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"My name's Miranda Chook, a CPA. Accounts payable turnover or days payable is one way of quantifying how well a company's using a major component of working capital. The days payable will show how many, how much investment in purchases as being supported by this, the use of working capital. There are a couple ways to calculate this. One way is to divide accounts payable by purchases for the period. Some companies will calculate this by taking accounts payable and dividing it by cost of goods sold. In any case, it does need some context to be meaningful and to be actionable. So take a look at what the trend has been within your company to get an idea of how well you are utilizing this aspect of working capital."

eHow Article: How to Calculate Days Payable