What do you meant by trade payable days, Financial Econometrics

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Q. What do you meant by Trade payable days?

Year-end trade payables/Credit purchases (or cost of sales)x 365 days

This is the length of time taken to pay suppliers. Ratio can also be calculated using cost of sales, as credit purchases aren't usually stated in the financial statements. High trade payable day's is good as credit from suppliers represents free credit. If it's too high then there is a risk of suppliers not extending credit in the future and may lose goodwill. High trade payable days  may  also  indicate  that  business  has  no  cash  to  pay  which  indicates insolvency problems.


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