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Days payable outstanding dpo

Days Payable Outstanding (DPO)

Days Payable Outstanding (DPO) is a financial metric that measures the average number of days a company takes to pay its suppliers after receiving an invoice. A higher DPO means the company is taking longer to pay its bills, which could indicate effective cash flow management or potential delays in payments. DPO is an important indicator of a company’s liquidity and working capital management.

Example

A company with a DPO of 45 takes, on average, 45 days to pay its suppliers after receiving an invoice.

Key points

• DPO measures the average number of days a company takes to pay its suppliers.

• A higher DPO indicates that the company is delaying payments to suppliers, which may improve cash flow but could strain supplier relationships.

• DPO is a key metric in working capital management.

Quick Answers to Curious Questions

A high DPO indicates that a company is taking longer to pay its suppliers, which may help with cash flow but could strain supplier relationships.

DPO is calculated by dividing accounts payable by the cost of goods sold and then multiplying by the number of days in the period.

DPO helps companies manage their cash flow by delaying payments to suppliers, allowing them to use cash for other operational needs.

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