The average payment period is the solvency ratio. It is the average time which a company takes to pay off credit accounts payable.
Many times credit arrangement used for payment, when business make the purchase at wholesale. These are the simple arrangement of payment which gives some days to the buyer to pay for purchases.
Definition: What is the Average Payment Period.
Most companies give the discount on paying in a shorter time period. If the balance paid in 30 days then the company may give a 10 per cent discount if the credit term is 10/30 by the company.
From the company standard credit, the term is 90 days which means that the company allows 90 days for payment on which no discount offer.
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