UNIT 7 - Payables days Flashcards
what type of ratio
efficiency
what does PD show
how long in days, takes to payback the creditors e.g suppliers
formula
payables/cost of sales x 365
payables aka
current liabilities
as as oaybales aka current liabilities where can we find them
balance sheet
what are Cost Of Sales
direct costs of producing g/s
where do we find COS
top of INCOME STATEMENT under rev
We want this ot be bigger or smaller than recievables
bigger
why do we want PD to be bigger than recievables
and why
want o be receiving debtors (£in) before paying creditors out
suggest good liquidity and cash flow
but what happens if payables days too high
damage supplier relationship
high payables days may damage supplier relationship but what should we consider
who is supplier
consider the supplier forme
are they strategic supplier i.e they may not be replaceable therefore wouldn’t want to strain/make payables too high e.g JIT to help you to be lean and efficient
what could suggest a liquidity issue with payable and current ratio
payable high(trending higher) but in same time period current ratio i.e liquidity is decreasing
what happens when we identify if theres a liquidty issue
suggest SOF applicable and appropriate to bs
