How to calculate accounts payable turnover

To calculate accounts payable turnover, you must measure the average number of days that an amount owed to a creditor that is due remains unpaid. When you divide that average number by 365, you get the accounts payable turnover ratio. Here is that calculation in formula form:

The accounts payable turnover ratio refers to how fast an organization makes payments to its suppliers and creditors that extend lines of credit to its business. Accountants determine the ratio by calculating the average number of instances when an organization pays its accounts payable balances during certain time frames.

The accounts payable turnover ratio is a key factor in an organization's balance sheet. It indicates liquidity and management of cash flow.