Hudson Enterprises has sales of 1040000 average accounts rec

Hudson Enterprises has sales of $1,040,000, average accounts receivable of $41,400 and average accounts payable of $45,600. The cost of goods sold is equivalent to 63% of sales. How long does it take Hudson to pay its suppliers? (Assume a 365-day year)

Solution

Cost of goods sold = 63% of sales = 63% x $1,040,000 = $655,200

Accounts payable days = [ Average accounts payable / Cost of goods sold ] x 365 days

or, Accounts payable days = [ $45,600 / $655,200 ] x 365 days = 25.40293 days or 25.40 days or 25 days