Payables Turnover
COGS divided by average accounts payable. Measures how many times payables turn over per year — the annual-rate counterpart to DPO.
When to use: Use to gauge supplier-payment cadence. Lower turnover = longer payment terms = better working-capital management (with caveats about supplier-relationship risk at extremes).
Formula
Variables
| Symbol | Name | Description | Unit |
|---|---|---|---|
| PayTurn | Payables Turnover | COGS ÷ average payables | integer |
| COGS | Cost of Goods Sold | Annual cost of goods sold | $ |
| Payables | Accounts Payable | Average accounts payable balance | $ |
Real-Life Examples
Example 1: Manufacturer
Annual COGS $1,200M, average payables $100M.
Given
COGS = 1,200Payables = 100
Step-by-Step
1.Payables Turnover = 1,200 / 100 = 12
Result:12.00
Payables turn 12 times per year — equivalent to DPO ≈ 30 days, consistent with standard net-30 terms.
Frequently Asked Questions
Reciprocals scaled by 365. Use whichever is more interpretable in your context.
Total purchases is more precise (matches what the payables actually represent) but rarely disclosed cleanly. COGS is the standard textbook proxy and what most tools use.