Accounts payable turnover, days

Accounts payable turnover, days is a financial ratio that indicates the average time (in days) that a company takes to pay its bills and invoices to its trade creditors, which may include suppliers, vendors, or financiers.

A company with a higher value of this ratio takes longer to pay its bills, which means that it can retain available funds for a longer duration, allowing the company an opportunity to use those funds in a better way to maximize the benefits. A high accounts payable turnover, days ratio, however, may also be a red flag indicating an inability to pay its bills on time.

The formula for Accounts payable turnover, days is:

Accounts payable turnover, days = (Average payable / Cost of goods sold, TTM) x 365 days