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CMA Intermediate · Financial Management and Business Data Analytics · Payable Management

A firm's analyst plots days payable outstanding (DPO) for 40 suppliers and finds a few values above 200 days while most lie between 30 and 60 days. For summarising typical payment period for credit-term review, which measure is most appropriate?

The median is most appropriate because a few extreme DPO values above 200 days distort the mean. The median reflects the typical supplier payment period and is not affected by outliers, whereas the range measures spread only.

  1. AMean, because it uses every value
  2. BMedian, because it is robust to extreme valuesCorrect
  3. CRange, because it shows typical payment
  4. DMode of the extreme values

Explanation

A few extreme DPO values pull the mean upward and misrepresent the typical payment period. The median is resistant to outliers. The range only shows spread, not a typical value.

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