How are Accounts Payable Days calculated?

The Accounts Payable Days are calculated as follows:  RTC compares the Accounts Payable balance in the Balance Sheet for the month, to the Purchases balance in the Income Statement for the month. Purchases are defined as all costs less Wages, Interest, Depreciation and Non-Operational (or any accounts tagged as Materials, Direct Costs Other, and Indirect Costs Other).  If the AP balance is equal to the month’s purchases, it calculates it as 30 days.

The amount of AP over the Purchases balance for that month is then compared to prior months purchases and calculated as a portion of days.

Example:

AP balance as at June $2,000,000
Purchases for June $1,500,000 (30 days)
AP balance remaining $500,000 ($2,000,000-$1,500,000)
Purchases for May $1,600,000 ($500,000/$1,600,000 x 30 days = +9.375 days)

Total AP days are 30 + 9.375 days = 39