DAYS PAYABLE OUTSTANDING Definition

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DAYS PAYABLE OUTSTANDING (DPO) is an estimate of the length of time the company takes to pay its vendors after receiving inventory. If the firm receives favorable terms from suppliers, it has the net effect of providing the firm with free financing. If terms are reduced and the company is forced to pay at the time of receipt of goods, it reduces financing by the trade and increases the firms working capital requirements. It is calculated: Days Payable Outstanding = 365 / Payables Turnover (Payables Turnover = Purchases / Payables).

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GAIN is: a. the amount by which the revenue of a business exceeds its cost of operating; b. rise in rate or price; c. earn on some commercial or business transaction; d. earn as salary or wages.

RETURNS OUTWARDS are goods bought on credit from a supplier and returned for some reason to be refunded for (Purchases returns).

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