Question

Accounts Payable days are most closely related to what other measure?

a. Capital expenditures.

b. Gross margin.

c. Inventory turnover.

d. Gross profit.

Answer 1

Account payable arises when the business buys the goods from supplier on credit. The number of days it takes the credit to be converted to cash is the account payable days. To have cash for payment, the business must first convert the raw material and inventory into finished goods and convert the sale of goods into cash. So account payable days is closely related to inventory turnover as the inverse of inventory turnover is the inventory days.

Answer is c) Inventory Turnover