AVERAGE PAYMENT PERIOD Definition

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AVERAGE PAYMENT PERIOD (APP) is the number of days an entity takes to pay off credit purchases. As the average payment period increases, cash should increase as well, but working capital will remain the same. Formula: accounts payable / (total annual purchases / 360).

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PREPAYMENT is the payment of all or part of a debt prior to its due date.

SG&A refers to the indirect overhead costs contained within the Sales, General and Administrative expense/cost categories. Generally, SG&A expenses of <30% are exceptional, while SG&A approaching 100% indicates a highly competitive industry. Consistency of SG&A is key.

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