Alright this ratio is related to our ap turnover. It's our days payable outstanding. So the days payable outstanding. It helps us analyze how long a dollar sits in a. P. So how long were able to, oh this dollar before we have to pay it back before being paid back. Right? So You can imagine we might want to hold on to be able to have that dollar in ap as long as possible right? Because that's almost interest free loans right? They don't charge us interest on our ap if they give us 30 days to pay 60 days to pay it's not like they say okay after 60 days you also have to pay interest. No with these accounts payable they're just saying pay us in 60 days right no interest involved. So you can imagine it might be nice to be able to hold on to these a little longer. So the days payable outstanding. It's a common efficiency ratio and like I said it's related to the ap turnover. So let's go over that real quick and then calculate days payable outstanding. So first we've got a p. Turnover and remember that in the numerator we've got purchases or cogs. And generally we're gonna deal with cogs in the numerator divided by our average ap every time we deal with an average that's gonna be the beginning balance plus the ending balance divided by two regardless of what account it is right? That's how we calculate our average balance. So once we've calculated our ap turnover we can use that number to calculate our D. P. O. R. Days payable outstanding. So in the numerator we're gonna have 365 for 365 days. And we're gonna divide that by the ap turnover that we had just calculated. Cool. So what does this tell us? Well it's gonna give us a number of days right? This is gonna tell us a number of days and that's how long that that dollar that we owe is sitting in accounts payable on average before we pay it back. So it's a number of days and in different industries while there's going to be different credit terms depending on the industry, maybe you have some leverage with your suppliers and you're able to uh oh them the money longer whatever it is you're gonna use benchmarking and you're gonna check against your competitors. You're gonna check against the industry average for what your D. P. O. Is. Right? So when you've got a lower D. P. O. Right? This is a lower amount of days. It implies strong liquidity right? Because you're able to pay off your suppliers quickly if your D. P. O. Is 10 days. Well that means you you buy something and you're able to pay it off in 10 days compared to you know a 50 day 60 day D. P. Oh well that means it takes you a lot longer to pay that that might imply worse liquidity. And a creditor is going to pay attention to that when they loan you money compare that to a higher D. P. O. When you've got a higher D. P. O. Well it implies that it's taking you longer to pay, right? It's taking you 50 days 60 rather than 10. That's a higher D. P. O. But like I said it could mean you have leverage with your suppliers, right? Maybe you're some giant like amazon or uh walmart and you have leverage because you you own so much of the market that you can modify the credit terms based on what you want because you have that kind of power in the market. Okay. So D. P. O. It could be good or bad. Right? Low or high. It could mean different things. So this could be nice information when you're doing an analysis project. Alright. Let's go ahead and we'll do an example together and then we then you guys can practice one. Alright let's do that now.