The cost of goods sold is used in the denominator of the days' payable outstanding formula because payables relate to the purchase of goods recorded at cost.
What is the Days' Payable Outstanding Formula?
The Days' Payable Outstanding Formula is given by Accounts Payable X Number of Days/Cost of Goods Sold (COGS).
The cost of goods sold is the value of beginning inventory plus purchases or production minus the ending inventory.
Thus, the cost of goods sold is used in the denominator of the days' payable outstanding formula because payables relate to the purchase of goods recorded at cost.
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