is useful in measuring the relationship with suppliers
no clear cut figure for what is good or badoften varies across industriesusually changes based on the size of company and purchasing poweroften requires further research to understandreal world example of dpothe snippet below is taken from amazon s consolidated statement of operations for the fiscal year ended dec 31 2023 1 the figures represent the amount of expenses related to the cost of sales note that in the calculation below other operating expenses such as sales marketing technology general or administrative costs have been omitted in addition amazon reports its accounts payable balance on its balance sheet 2using this information you can calculate amazon s dpo for the accounts payable portion we can assume that the beginning balance of one period is the ending balance of the prior period therefore using this method the average balance of accounts payable for 2023 was 82 291 million alternatively amazon s average daily accounts payable balance was 225 5 million for the cogs the company directly reports that as cost of sales for 2023 amazon s cost of goods sold was 272 3 billion therefore dpo can be calculated as 82 3 billion 272 3 billion 365 days therefore amazon s dpo is approximately 110 days this dpo calculation demonstrates amazon s ability to leverage its size to enter into contracts in which it has long open periods where it is not expected to pay an invoice 