Days payable outstanding

A ratio compares two figures to reveal something neither number shows on its own. Days payable outstanding compares how much a company owes its suppliers against how quickly it pays them, showing how long it holds onto cash before settling its bills.

Days payable outstanding measures, on average, how many days a company takes to pay its own suppliers. It divides accounts payable by cost of goods sold, then multiplies by the number of days in the period.

The formula is:

A higher days payable outstanding means a company is holding onto cash longer before paying suppliers, which can help its own cash flow, though stretching it too far can strain supplier relationships. It is one of the three components, alongside days inventory outstanding and days sales outstanding, used to calculate the cash conversion cycle.