1) How long should accounts payable be held before payment is made? 2) Discuss the trends...

1) How long should accounts payable be held before payment is made?

2) Discuss the trends in DPO

Expert Solution

ANS 1

Since there are no specific legal requirements limiting the time period for accounts payable outstanding, in essence, they are allowed to remain for as long as the receiver company/creditor company is willing to wait for payment. Accounts payable are the sums of money borrow from an individual or a company for services or goods received. Most payable operate in the form of lines of debit and are outstanding in a short period of time. These lines of debit allow customers to avoid the inconvenience of physically paying for a purchase each time a transaction is made. In more simple terms, a payable is an agreement made with a supplier/creditor to pay to company in a timely manner for a good or service received.

The most common lengths of time of accounts payable generally remain outstanding are net 30 days, net 45 days, net 60 days and 30 days from the end of the month. As an example, if the accounts payable has an outstanding payment period of net 30 days.

Ans 2.

The Detrended Price Oscillator (DPO) is an indicator designed to remove trend from price and make it easier to identify cycles. DPO don't extend to the last date because it is based on a displaced moving average. However, alignment with the most recent is not an issue because DPO is not a momentum oscillator. Instead, DPO is used to identify cycles highs/lows and estimate cycle length

The Detrended Price Oscillator (DPO) measures the difference between a past price and a moving average. Keep in mind that DPO is itself displaced to the left. The indicator oscillates above/below zero as prices move above/below the displaced moving average.

Even though this indicator looks like a classic oscillator, it is not designed for momentum signals. The displaced moving average is set in the past and this is why the DPO is shown in the past. Even with this displacement, DPO peaks and troughs can be used to estimate cycle length. DPO filters out the longer trends to focus on shorter cycles.

ekkarill92 answered 1 year ago

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