What ratio is accounts payable divided by cost of goods sold times 365?

Accounts payable divided by cost of goods sold, multiplied by 365, is the days payable outstanding ratio. It estimates the average number of days a company takes to pay suppliers.

The usual formula is DPO = accounts payable ÷ (annual cost of goods sold ÷ 365). Analysts may use average accounts payable rather than the ending balance, and purchases rather than cost of goods sold when that figure is available. The result is expressed in days, not as a percentage.

DPO is one part of the cash conversion cycle, alongside days sales outstanding and days inventory outstanding. A higher DPO can preserve cash by delaying supplier payments, but it may also signal financial stress or overdue bills. A lower DPO can reflect prompt payment or weaker negotiating terms.

Comparisons are most useful between similar businesses because supplier contracts, inventory cycles, seasonality and industry practices vary widely. DPO should therefore be read with liquidity and cash-flow measures rather than treated as a standalone measure of financial health.