What is the advantage of a longer Days Payable Outstanding?

A longer Days Payable Outstanding (DPO) indicates that a company takes more time to pay its suppliers. The primary advantage of this is the ability to retain cash for a longer period, allowing for more optimal cash management. This means the company can use the cash for other productive purposes, such as investing in growth opportunities, paying off debt, or covering operational expenses. Retaining cash for extended periods can enhance liquidity, giving firms more flexibility in managing their finances and reducing the need for external financing.

The other choices do not directly relate to what DPO measures or its benefits. Higher receivable collection rates relate to the efficiency of collecting payments from customers, which is not influenced by DPO. Lower inventory holding costs pertain to how well a company manages its inventory, while increased stockholder equity concerns the overall value of the company as it relates to ownership stakes. These factors do not directly connect to the advantages posed by a longer DPO.