Days Sales Outstanding to project future Accounts payable

chris_m94's picture
Rank: Baboon | 170

Hey guys,

I just study a model and one thing I never get is how/why to forecast accounts payable.
In the model the formula for accounts payable is = (days payable outstanding / 365 * COGS)

I get what days payable outstanding means, it's just the average number a customer takes to pay his invoice and shows the efficiency of the firm (correct me if I'm wrong).

But why do I take COGS as a multiplicator? Can someone here explain me that fast and simple?

Thank you guys

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Oct 24, 2018
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