Nancy Chawla In: Category - ExpenseHow to calculate days payable outstanding, formula and example?days payable outstandingexampleformula ShareFacebook1 AnswerVotedRecent Dheeraj 2020-08-30T22:33:26+05:30Added an answer on August 30, 2020 at 10:33 pm This answer was edited. Meaning of Days Payable OutstandingDays Payable Outstanding (DPO) refers to the average number of days taken by an organization (or) company to pay to its outstanding suppliers/vendors. It is calculated on the credit purchases made by an organization. It is computed on a monthly, quarterly (or) annual basis. This portraits how well can a company manage its cash outflows.If the company takes less time to make payment to its outstanding suppliers then it states that an organization has a strong financial position. but if the company takes a more (or) longer time to pay its outstanding supplier then it could either be an action plan or else the company’s financial position is weak.FormulaThe following formula is used for calculating Days Payable Outstanding (DPO) of an organization.Where Cost of Goods Sold (COGS) = Opening Inventory + Purchases – Closing Inventory.ExampleABC Ltd has furnished you with the following information. Compute Days Payable Outstanding.S.No.ParticularsAmount1.Average Accounts Payable45,0002.Cost of Goods Sold2,25,0003.Number of Days30Calculation Part-Days Payable Outstanding = Average Accounts Payable * No. of days/Cost of Goods Sold= 45,000 * 30/2,25,000= 6 DaysIn my perspective, 6 days is a low average period for an organization for making the payments to all the outstanding suppliers. Therefore it represents a fairly good DPO. Although it depends on the organization about their understandability on high or low DPO.0Reply Share ShareShare on FacebookShare on TwitterShare on LinkedInShare on WhatsAppLeave an answerCancel replyYou must login or register to add a new answer.