Hare, Inc., had a cost of goods sold of $43,921. At the end of the year, the acc

Question

Hare, Inc., had a cost of goods sold of $43,921. At the end of the year, the accounts payable balance was $7,943. How long on average did it take the company to pay off its suppliers during the year? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

Hare, Inc., had a cost of goods sold of $43,921. At the end of the year, the accounts payable balance was $7,943. How long on average did it take the company to pay off its suppliers during the year? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

Explanation / Answer

The formula of creditor Turnover ratio:

=(Cost of Goods Sold/ Average accounts payable)

=($43921/$7943)

= 5.529 times in a year

To convert into 365 days

= 365/5.529

= 66 dyas

Conclusion: the company needs to take average time for pay off its credittors is 66 days

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