Days Payable Outstanding
Time
Represents the average number of days it takes a company to pay its invoices from trade creditors, such as suppliers. Days Payable Outstanding (DPO) can offer insights into the company’s liquidity and how efficiently it manages its obligations. Longer DPO might indicate that a company is trying to conserve its cash.
Formula
(Accounts Payable / Cost of Goods Sold) x Number of Days
Example
If accounts payable is $5,000 and COGS is $25,000 for a 30-day month, DPO = (5,000 / 25,000) x 30 = 6 days.