Accounts payable turnover period or Accounts payable turnover days or Number of days of payables are different names of same ratio that help us determine how much time (in days mostly) entity took on average to pay its suppliers.
Payable turnover days ratio is a variation of accounts payable turnover ratio. The original ratio helps determine the frequency to pay off all the suppliers which is usually a number. Whereas this ratio give us days and thus much more easily understandable. This ratio is usually measured in terms of days in a year that can be 360 or 365 or any other number of days management deems fit. Sometimes only working days excluding weekends and public holidays are also used for measurement purposes.
Formula to calculate accounts payable turnover days is following:
Accounts payable turnover period = Number of days in the period / Accounts payable turnover ratio
Munsoob Plc makes all purchases on credit basis. Total purchases during the period were 1,400,000. If the year is 365 days and average payables are 350,000 then what are average payable turnover days?
Accounts payable turnover ratio = 1,400,000 / 350,000 = 4
Accounts payable turnover days = 365 / 4 = 91 days approx