Question

Patagonia and Columbia Sportswear released the following financial statement information:

Patagonia			Columbia Sportswear
(in thousands)	2019		(in millions)	2019
Year-end accounts payable	$ 1,242		Year-end accounts payable	$ 203,872
Average accounts payable	1,193		Average accounts payable	190,373
Sales	16,148		Sales	3,305,802
Cost of goods sold	9,855		Cost of goods sold	2,191,803

  
Which of the two companies listed above is leaning on the trade more?

		Patagonia because its accounts payable turnover is higher and its accounts payable days outstanding is lower.
		Columbia because its accounts payable turnover is lower and its accounts payable days outstanding is higher.
		Columbia because its accounts payable turnover is higher and its accounts payable days outstanding is lower.
		Patagonia because its accounts payable turnover is lower and its accounts payable days outstanding is higher.

Answer 1

Patagonia Sportswear Account Paybale turnover = COGS/ Average account Payable

Patagonia Sportswear Account Paybale turnover = 9,855/ 1,193

Patagonia Sportswear Account Paybale turnover = 8.261

Columbia Account Paybale turnover = COGS/ Average account Payable

Columbia Account Paybale turnover = 2,191,803/ 190,373

Columbia Account Paybale turnover = 11.51

Patagonia Sportswear APDO = Year end account Payable/ (COGS/365)

Patagonia Sportswear APDO = 1,242/ (9,855/365)

Patagonia Sportswear APDO = 46 days

Columbia APDO = Year end account Payable/ (COGS/365)

Columbia APDO = 203,872/ (2,191,803/ 365)

Columbia APDO = 33.95 days

A company is said to be leaning on the trade more when it has lower account paybale turnover and higher account payable day outstanding

Patagonia Sportswear has lower account paybale turnover and higher account payable day outstanding

Option D is correct