What generally happens to accounts payable (a/p) days in a distressed company?

In a distressed company, accounts payable (a/p) days typically rise significantly beyond normal levels. This increase occurs primarily because the company may face cash flow challenges, making it difficult to pay suppliers in a timely manner. As a result, the company may negotiate extended payment terms with its creditors to manage its liquidity crisis. This practice allows the company to conserve cash for operational needs and maintain some level of functioning amid financial struggles.

Additionally, suppliers may respond to the distressed status of the company by tightening credit terms or demanding quicker payments due to their own risk assessments, which may further exacerbate the situation. Consequently, the situation leads to a situation where accounts payable days extend beyond industry norms, reflecting the company's difficult financial positioning and its need to prioritize cash preservation over timely payments.

The other possibilities present scenarios that don't typically align with the behavior of distressed companies. For instance, stable a/p days around 30 days is unrealistic in a distressed situation, as companies rarely maintain their usual payment practices. Falling below industry standards implies improved payment behavior, which does not align with the circumstances of distress. Fluctuating inconsistently could suggest randomness, but generally, a clear trend toward longer payment periods is observed in distressed scenarios.