Which of the following is likely to reduce the trade payables payment period?
A Paying trade suppliers within seven days of reciept of invoice to obtain a discount
B Buying an increasing volume of credit purchases during an accounting period
Sir the correct answer was A I was wondering why isn’t B the answer because in the formula for trade payable period it is. (trade payables/credit purchases )*365
so if credit purchases changes then trade payable period also could change right???
B is wrong because if they buy more then they will be owing more. It doesn’t affect how long they take to pay their suppliers, which is what the payables payment period is measuring.