Working Capital.3.1

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Suggested keywords: Float, Cash flow forecasts, EOQ model, Just-In-Time, Granting credit, Accounts Payable, Accounts Receivable.

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Huỳnh Mai - EOQ, ACCOUNTS PAYABLE

Economic order quantity (EOQ) is a decision tool used in cost accounting. It’s a formula that allows you to calculate the ideal quantity of inventory to order for a given product. The calculation is designed to minimize ordering and carrying costs.

When a company purchases goods on credit which needs to be paid back in a short period of time, it is known as Accounts Payable. It is treated as a liability and comes under the head ‘current liabilities’. Accounts Payable is a short-term debt payment which needs to be paid to avoid default.