Business FinancesQuestion 500 of 690
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.
Practice all 690 questions free — no signup required.
Related questions on this topic
- A contractor has current assets of $240,000 (including $60,000 in inventory and $20,000 in prepaid expenses) and current liabilities of $100,000. What is the quick (acid-test) ratio?
- When is the quick ratio more meaningful than the current ratio for a construction company?
- A contractor has annual credit sales of $1,825,000 and an average accounts receivable balance of $250,000. What is the Days Sales Outstanding (DSO)?
- A contractor has DSO of 55 days, days inventory outstanding (DIO) of 30 days, and DPO of 40 days. What is the cash conversion (working-capital) cycle?
- A contract has a total contract price of $500,000 and an estimated total cost of $400,000. To date, the contractor has incurred $300,000 in actual cost and billed the owner $360,000. Using the cost-to-cost percentage-of-completion method, what is the percent complete and the revenue earned to date?
- A contractor has earned $400,000 in revenue under percentage-of-completion accounting, but has billed the customer $450,000 to date. How is this $50,000 difference reported on the balance sheet?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against California CSLB Contractor License Law & Business Exam · How we review