Days Payable Outstanding Formula can be calculated by dividing the account payable by the derivation of cost of sale and the average number of days outstanding.
Equation of Days Payable Outstanding Formula is
Days Payable Outstanding = [Account Payable/(Cost of Sales/Numer of days)]
From the above formula, it is clear that DPO calculation depends on the 3 terms which are Account payable, Cost of sales, and Number of days.
Account payable available on the balance sheet of the company. Cost of sales available on the income statement of the company.
The number of days represents the period which may be 3 months, 6 months or 1 year. Here you can learn about the definition of Days payable outstanding (DPO).
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