The payables deferral period is the average length of time between the purchase of materials and labor and the payment of cash for them. It is calculated as follows:

Payables$/($Cost of goods sold$/365)$

If a firm can sell goods faster, collect receivables faster, or defer its payable longer without hurting sales or increasing operating costs, its: $$ would decline, its

ess Tips

interest expense would be reduced, and its profits and stock price would be improved. This demonstrates that good working capital management is important to a firm's financial position and performance.