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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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