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    Question

    ABC Ltd’s purchases during the year were Rs

    200000. The balance sheet shows an average accounts payable balance of Rs 15000. ABC’s payables period approximately equals to:
    A 37 days Correct Answer Incorrect Answer
    B 28 days Correct Answer Incorrect Answer
    C 44 days Correct Answer Incorrect Answer
    D 13 days Correct Answer Incorrect Answer
    E 23 days Correct Answer Incorrect Answer

    Solution

    Purchases Turnover Ratio = Purchases/ Average Payables i.e: 200000/15000 = 13.33 Payables Payment Period = Number of days in a year/ Purchases Turnover Ratio 365/13.33 = 27.38 ~ 28

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