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Oct 2, 2016 |
Financial Ratios,  |
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Days Payables

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Days payables express the average number of days it takes the company to pay its invoices from trade creditors, such as suppliers.
But we must be very careful with the calculation of this value. In fact, days payables are calculated as the ratio between non-homogeneous values as Trade Payables, unlike costs, are inclusive of VAT. For a correct comparison it would then be necessary, provided that we have the relevant information, to take in the denominator, the value of purchases including VAT or, alternatively, in the numerator the Trade Payables with VAT excluded, so to have consistent and comparable values.