Business FinancesQuestion 500 of 1632
A contractor's annual cost of goods sold is $1,460,000, average accounts payable is $200,000, and average inventory turns are 36 days. What is the Days Payable Outstanding (DPO)?
a.25 days
b.36 days
c.40 days
d.50 days
Explanation
DPO = (Average Accounts Payable ÷ Annual COGS) × 365 = ($200,000 ÷ $1,460,000) × 365 = 0.13699 × 365 = 50 days. A higher DPO means the contractor takes longer to pay suppliers, which can improve cash flow but risk supplier relationships.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)