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Ratios: Days Payable Outstanding (DPO) definitions Flashcards

Ratios: Days Payable Outstanding (DPO) definitions
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  • Days Payable Outstanding
    Efficiency ratio showing average days a company takes to pay suppliers, reflecting payment practices and liquidity.
  • AP Turnover
    Metric calculated as cost of goods sold divided by average accounts payable, indicating payment frequency to suppliers.
  • Accounts Payable
    Short-term liability representing amounts owed to suppliers for goods or services received but not yet paid.
  • Average Accounts Payable
    Mean value of beginning and ending accounts payable balances, used to smooth out fluctuations over a period.
  • Cost of Goods Sold
    Direct costs attributable to the production of goods sold by a company, often used in efficiency ratios.
  • Liquidity
    Ability of a company to meet its short-term obligations, often inferred from how quickly it pays suppliers.
  • Credit Terms
    Agreed-upon conditions between buyer and supplier regarding payment timing and requirements for purchases.
  • Leverage
    Bargaining power a company holds over suppliers, often allowing for extended payment periods without penalties.
  • Benchmarking
    Process of comparing a company’s financial metrics, such as DPO, against industry standards or competitors.
  • Efficiency Ratio
    Financial metric assessing how effectively a company manages its resources, such as payment cycles.
  • Industry Average
    Standard value derived from similar companies, used as a reference point for evaluating financial performance.
  • Creditor
    Entity or individual that lends money or extends credit, often analyzing DPO to assess financial health.
  • Financial Health
    Overall condition of a company’s finances, including liquidity, solvency, and ability to meet obligations.