If creditors are paid 12 times a year, what, on average, is the creditors turnover period in days?
A) 12 days
B) 30.4 days
C) 20 days
D) none of the above

Question

Quizplus · Accepted Answer

To calculate the creditors turnover period, we need to use the formula:

Creditors Turnover Period = (Accounts Payable / Cost of Sales) x 365 days

Since creditors are paid 12 times a year, we can assume that the accounts payable is equal to the cost of sales for one month. Therefore, we can simplify the formula to:

Creditors Turnover Period = (Accounts Payable / Cost of Sales) x 30 days

If we assume that the cost of sales remains constant throughout the year, then the creditors turnover period would be:

Creditors Turnover Period = (Accounts Payable / Cost of Sales) x 30 days
= (1 / 1) x 30 days
= 30 days

Therefore, the answer is not A or C. The closest answer is B) 30.4 days, which is within reasonable rounding error.

If Creditors Are Paid 12 Times a Year, What, on Average