Days Payable Outstanding - Meaning, Formula, Calculation & Interpretations

This tutorial gives a comprehensive overview of Days Payable Outstanding, its meaning, calculations and interpretations. We will also use the Colgate Case Study to calculate this ratio in Excel. You can download the Colgate Days Payable Outstanding template from this link - www.wallstreet...
What is Days Payable Outstanding?
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Days payable outstanding helps measure the average number of days it takes a business to pay off its creditors.
Formula
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Days Payable Outstanding Formula = Accounts Payable / (Cost of Sales / Number of Days)
Interpretation of Days Payable Outstanding (DPO)
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If the company's DPO is lower than the industry's average DPO, the company may want to consider increasing its days payable outstanding. However, the company should keep in mind that doing so does not cost them the vendor or any positive supplier benefits.
If the company's DPO is higher than the industry's average DPO, the company should consider lowering its DPO. By doing so, they will be able to satisfy the vendors.
For more details, you can refer to our article - www.wallstreet...
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[@wallstreetmojo]

Download the Colgate Days Payable Outstanding excel template used in this video from this link - www.wallstreetmojo.com/ratio-analysis-template/

[@farasghai3683]

Following all parts of ratio analysis, its really helpful.

[@wallstreetmojo]

thanks!

[@narayanbista490]

The examples in this video was very informative and easy to understand thank you for such an amazing video with such clear concept.

[@teresadcruz4573]

Overall best video and excellent explanation. I liked the way of teaching with best example. Nice.

[@wallstreetmojo]

Thanks a lot

[@iris_1246]

so useful! thanks for explaining and applying the knowledge to real life cases❤

[@wallstreetmojo]

Thanks for sharing your perspective!

[@ondrejmertlik7506]

Hello, thank you for the video. My question is how do you treat other purchases, like service expenses, utilities etc? Those which aren’t going directly to COGS but are overheads and you have them in accounts payables. Should I include them as well to COGS? Thank you.

[@jyotikrupashankarsingh2582]

Another Useful video. Thank you!

[@wallstreetmojo]

You're welcome!

[@derekcorry7824]

It was easy to understand with the case study.

[@wallstreetmojo]

Thank you!

[@ashmitjacob4659]

Very helpful, thanks.

[@wallstreetmojo]

You're welcome!

[@ЯнкоГеоргиев-н3л]

Hello,
First of great video my friend.
I have one stupid question - what is the difference between DPO and Average Payment Period, because for me they represent same thing?
Thanks in advance :)

[@junegordan2164]

Good explanation.

[@wallstreetmojo]

Glad it was helpful!

[@shahilgourisaria2336]

Does increase in number of days of payable contributed to improve liquidity

[@carlosrobert9901]

Yes because that means ur going to be receiving more casg from your receivables and delaying cash outs from payables , so yes it improves liquidity