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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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