Ratios: Days Payable Outstanding (DPO) definitions Flashcards
Ratios: Days Payable Outstanding (DPO) definitions
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Days Payable Outstanding Efficiency ratio showing average days a company takes to pay suppliers, reflecting payment practices and liquidity. AP Turnover Metric calculated as cost of goods sold divided by average accounts payable, indicating payment frequency to suppliers. Accounts Payable Short-term liability representing amounts owed to suppliers for goods or services received but not yet paid. Average Accounts Payable Mean value of beginning and ending accounts payable balances, used to smooth out fluctuations over a period. Cost of Goods Sold Direct costs attributable to the production of goods sold by a company, often used in efficiency ratios. Liquidity Ability of a company to meet its short-term obligations, often inferred from how quickly it pays suppliers. Credit Terms Agreed-upon conditions between buyer and supplier regarding payment timing and requirements for purchases. Leverage Bargaining power a company holds over suppliers, often allowing for extended payment periods without penalties. Benchmarking Process of comparing a company’s financial metrics, such as DPO, against industry standards or competitors. Efficiency Ratio Financial metric assessing how effectively a company manages its resources, such as payment cycles. Industry Average Standard value derived from similar companies, used as a reference point for evaluating financial performance. Creditor Entity or individual that lends money or extends credit, often analyzing DPO to assess financial health. Financial Health Overall condition of a company’s finances, including liquidity, solvency, and ability to meet obligations.
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