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hello
Purchase ledger department splits the total value of invoices for each month into 3 categories.
A: 2m paid after 30 days
b: 3m paid after 60 days
c: 4m paid after 90 days
cost of capital : 12 %
assume 30 days a month. What is the payables period ?
The kit answer goes like this.
payables: 2m+3m*2+4m*3=20
purchases: (2m+3m+4m)*12=108 . then he goes on to calculate the payables period.
I have no idea whats going on here. Plz help !The total purchases each month are 2 + 3 + 4 = 9, which means that over a year they are 108.
At the end of each month, the average payables are 20 (as per the workings in the answer you typed out).
So… the payables period is 20/108 x 12 = 2.22 months.
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