Accounts payable days is the amount of time that a borrower has to repay the entirety of a debt.
More Info: When learning the trade of accounting, there are many foreign term and phrases that you will need to become familiar with, as they are part of the “tools of the trade.” One such term that those who handle payment processing, or other accounts payable-related activities will need to understand very well is accounts payable days.
What Are Accounts Payable Days?
In short, this is the amount of time that a borrower has to repay the entirety of a debt, loan, etc. Basically, it can be thought of as the term of the financial obligation between borrower and lender. The actual amount of time that comprises each type of loan may differ. For example, with a credit card, the general number of accounts payable days is either 28 or 30.
How Are They Calculated?
Though it does vary, accounts payable days are generally calculated by dividing the accounts payable by the actual cost of the goods, then multiplying it by 365, the number of days in a year. This makes it easy to derive the number of accounts payable days that should be expected of different forms of credit lines.
For a business, the number of accounts payable days typically does not go beyond fifty. This is the number of days it should take for the business to pay all their bills and other financial obligations. Companies who can pay within the accounts payable period are typically seen as financially sound and worth lending to.
A basic term in accounting, accounts payable days refers to the amount of time it should take a company or individual to pay their financial obligations. A simple equation is used to determine the actual number of days and is incredibly valuable to potential lenders, as well as the business owners themselves.
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