What is the formula for Days Payable?

• A. Days in period / [COGS/AP]
• B. Days in period / [COGS/AR]
• C. Net sales / AP
• D. AP / COGS

Answer: (A)

Days Payable Outstanding measures how long, on average, a company takes to pay its suppliers. The standard formula is Days in period times (Accounts Payable divided by Cost of Goods Sold). That is, DPO = (AP / COGS) × Days in period, which is the same as Days in period ÷ (COGS / AP). The option shown matches this form because dividing by the fraction COGS/AP yields the same result as multiplying by AP/COGS.

For example, with 365 days in the period, AP of 200,000 and COGS of 1,000,000, DPO = 365 × (200,000 / 1,000,000) = 73 days. Using the given form: 365 ÷ (1,000,000 / 200,000) = 365 ÷ 5 = 73.