accounts payable turnover
Definition
The accounts payable turnover ratio measures how quickly a company pays its suppliers by indicating the number of times payables are settled during the period. It is calculated by dividing the cost of goods sold (or total purchases) by the average accounts payable balance. A high turnover may reflect efficient cash management and strong supplier relationships, but it can also mean missed opportunities for early payment discounts. A low ratio may indicate relaxed payment terms or potential cash flow constraints, but could strain supplier partnerships. When combined with receivables and inventory metrics, payable turnover feeds into the cash conversion cycle, helping companies balance liquidity needs against working capital optimization and negotiate better payment terms.
See also
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