ACCA Applied Knowledge · Financial Accounting · Ratios
Marlow Co had cost of sales of $730,000 for the year. Opening trade payables were $60,000 and closing trade payables were $100,000. Purchases were $750,000 and all on credit. Using closing payables and a 365-day year, what is the payables payment period?
Payables days equal closing trade payables divided by credit purchases, multiplied by 365. Here 100,000 divided by 750,000 times 365 is about 48.7, so 49 days. Purchases are used because they are given.
- A49 daysCorrect
- B40 days
- C29 days
- D55 days
Explanation
Payables days = closing payables / credit purchases x 365 = 100,000 / 750,000 x 365 = 48.7, which is 49 days. Using cost of sales (730,000) would give 50 days, but purchases are available and are the correct base. Using the average payables of 80,000 is not what the question asks.
Did you get it right without looking?
One question tells you little. A timed set on Ratios shows your real accuracy, how long you take and where you lose marks.
More Ratios questions
- Brava Co has revenue of $2,000,000 and operating profit of $200,000. Capital employed is $1,000,000. Management plans to cut operating costs…
- Omega Co has profit from operations of $360,000, finance costs of $90,000, total equity of $1,200,000 and non-current liabilities (all inter…
- Extracts from a company's statement of financial position: ordinary shares $400,000; retained earnings $300,000; 5% redeemable preference sh…
- Entity X's profit from operations was $180,000 and capital employed (equity plus non-current liabilities) was $900,000 at the year end. Late…
- Kobe Co reported profit after tax of $900,000 and paid ordinary dividends of $300,000. Which of the following is the dividend cover?
- Orwell Co has revenue of $2,400,000, and non-current assets of $800,000 at the year end. Net current assets are $400,000. Non-current assets…