Days payable outstanding

Days payable outstanding measures, on average, how many days a company takes to pay its own suppliers. It is calculated as accounts payable divided by cost of goods sold, multiplied by the number of days in the period.

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.