Financial ratio analysis

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hello, I am a CA PCC Student. I have a doubt in financial ratio analysis. I hope someone can help me here. My Doubt is

In the balancesheet as on 31.3.xx - Payables = 20000
In the Profit and Loss account for 31.3.xx - Credit Purchases = 240000

Now payables Turnover = 240000/20000 = 12
AVERAGE AGE of payables = 12/12 = 1

This means that it will be paid in 1 month or 30 days.

My Question is How can it be that the average age is 1 month or 30 days. For example 20000/30 = 666.67 Rs per day Purchase. Therefore
The First 666.67 Will be 30 days old
The Second 666.67 will be 29 days old
The third 666.67 will be 28 days old.....

and so on Until the last 666.67 will be 1 day old....

The average will come to 15 or so days and not 30 days. So why are we saying that the average age is 30 days? What is the Logic?



Replies (2)
u do 1 thing.. bhul jao apna logic n go with my logic.. u have taken 30 days so ie.30days*12months=360days 360*666.6666666666 n so on.. =239999.9999999999 n so on..which is equivalent to 240000..so tht was perfect.. so next time dont indulge urself in wasting others time..n urs too..gudluck.
please will you send the topic pertaining to finance and tax.


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