Why does Days Payable Outstanding uses COGS?

[Daan]

I searched online for quite a while and saw many of the formulas using COGS as the denominator in DPO calculation. Saw 1 guy explained that the purchase is generally on trade credit but what if the company paid part of the purchase using cash? In that situation, isn't credit purchase a more suitable value for the denominator in DPO formula?

 

[kirby]

“Cost of stuff we bought on credit purchase” is not a standard line item on the income statement while COGS is. So COGS is all you’ve got to work with.

 

[Daan]

Oh, is this also the reason why some DSO calculation uses the Sales figure rather than Credit Sales?

 

[kirby]

Yup