Definition
Payables turnover measures how fast a company pays suppliers. Lower turnover (more days) preserves cash but may strain supplier relationships. Days Payable Outstanding (DPO) converts to days. Strategic AP management balances cash flow with supplier goodwill.
Formula
Payables Turnover = COGS / Average Accounts Payable; DPO = 365 / Turnover
Example
With $200M COGS and $40M average payables, turnover is 5x, or 73 days DPO. The company takes about 73 days to pay suppliers.
FAQ
What is Payables Turnover?
How quickly a company pays its suppliers.
How do you calculate Payables Turnover?
A common formula for Payables Turnover is: Payables Turnover = COGS / Average Accounts Payable; DPO = 365 / Turnover
Why is Payables Turnover important?
Payables Turnover helps investors evaluate efficiency and make more informed decisions.