) What is your Average Payment Period if your Accounts Payable are $20,000, cost of Goods Sold is $200,000, and Sales are $500,000?
To calculate the Average Payment Period, you need to divide the Accounts Payable by the average daily cost of goods sold. Here's how you can get the answer:
Step 1: Calculate the Cost of Goods Sold per day.
To do this, divide the Cost of Goods Sold (COGS) by the number of days in a year. Let's assume there are 365 days in a year.
COGS per day = Cost of Goods Sold / 365
COGS per day = $200,000 / 365
COGS per day ≈ $547.95
Step 2: Calculate the Average Payment Period.
To get the Average Payment Period, divide the Accounts Payable by the COGS per day.
Average Payment Period = Accounts Payable / COGS per day
Average Payment Period = $20,000 / $547.95
Average Payment Period ≈ 36.47 days
Therefore, your Average Payment Period is approximately 36.47 days.