what is days of inventory, receivables, payables?

Question

im currently doing an Accounting assignment on a company and i want to know what is days of inventory, receivables, payables?

I have access to all the financial reports, so what should i be looking at?
By the way, im in Australia (i know there is a difference in other countries in accounting standards but im not sure if this Days of inventory is the same throughout). If someone could help me out please. Thanks!

Answer 1

You wouldn't be able to see these numbers straight from the financial reports but compute it yourself using the figures provided in the balance sheet and P/L.

Days of inventory: Number of days needed to sell inventory (Inventory/COGS x 365 days)
Days of receivables: Number of days needed to collect money owed by trade debtors (Accounts receivables/Sales x 365 days)
Days of payables: Number of days taken to pay trade creditors (Accounts payables/COGS x 365 days)

The formulas for these financial ratios can be obtained from any financial accounting textbook. BTW, these ratios are uniformly used around the world and has nothing to do with accounting standards. They are used mainly by analysts to assess the liquidity of the company.

Answer 2

Receivables Days

Answer 3

Inventory - stock on hand

Recievables - accounts recievable, what people owe you for sales of inventory, servieces you've provided

Payables - accounts payable, what you owe, wages, utilities, rent....