Talk:Days payable outstanding

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Does COGS include labor cost? If it does, will DPO be smaller than actual?

== Contents of COGS and payables & average (talk) 01:42, 24 June 2012 (UTC)

COGS includes manufacturing labor in the inventory that was sold. The whole number is biased anyway, because payables (accounts payable) are also generated namely by SG&A costs. Using COGSBugsyJunior (talk) 01:38, 24 June 2012 (UTC) is the standard calculation if you are going to compare data outside your own company but internally you could make any adjustment you wanted. Also note that payables in public companies' balance sheet often include payables and accruals, include payroll accruals.

Lastly and importantly though, we should not use the ending period payables, but the average payables over the period analyzed by adding last year's (or last quarter if we are using quarterly COGS) to this year's ending balance of payables and dividing by 2. We want the payables over the period analyzed. Using the average and not a year end number is particularly important during times of growth or contraction and also applies to DSO and DIO (Days Sales Outstanding and Days Inventory Outstanding) calculations when taking the receivables and inventory numbers respectively.