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Accounts payable turnover ratio: formula and examples

What is the accounts payable turnover ratio?

The accounts payable turnover ratio shows how many times a business pays off its average accounts payable balance in a period. Divide supplier purchases, or cost of goods sold, by average accounts payable: $4.8 million of purchases against $400,000 of average payables is a turnover of 12, about 30 days to pay.

AP turnover is the mirror image of days payable outstanding: the same inputs expressed as a multiple rather than in days. Below: the formula, a worked example, figures from real 10-K filings and how to read a high or low ratio.

Last updated · Aequo AP editorial team

The accounts payable turnover formula

AP turnover ratio = supplier purchases ÷ average accounts payable. Purchases are cost of goods sold plus closing inventory minus opening inventory; if you do not hold inventory, use cost of goods sold or total credit purchases.

AP turnover inputs
InputHow to get it
PurchasesCost of goods sold + closing inventory − opening inventory (or credit purchases from your purchase ledger)
Average accounts payable(Opening AP + closing AP) ÷ 2, trade payables only
Turnover in daysDays in the period ÷ AP turnover ratio (this is DPO)

Worked example

A distributor has $4,800,000 of cost of goods sold, inventory that rose from $600,000 to $650,000, and average payables of $400,000. Its AP turnover is 12.1, or about 30 days.

  1. 1

    Work out purchases

    $4,800,000 + $650,000 − $600,000 = $4,850,000.
  2. 2

    Average the payables

    ($380,000 + $420,000) ÷ 2 = $400,000.
  3. 3

    Divide

    $4,850,000 ÷ $400,000 = 12.13 times a year.
  4. 4

    Convert to days

    365 ÷ 12.13 = 30.1 days.

With cost of goods sold instead of purchases the ratio is 12.0 (30.4 days). The difference is the inventory build: the business bought more than it sold. Illustrative numbers.

AP turnover by industry, from 10-K filings

Using cost of revenue, the construction and wholesale distribution companies in our sample turn payables about 10 times a year, while packaged food and beverage companies turn them about 4 times. Industry matters more than any single target.

Median AP turnover (cost of revenue ÷ average AP) by industry
IndustryCompaniesMedian turnoverIn days
Wholesale distribution810.4×35 days
Construction and engineering810.4×35 days
Retail88.2×45 days
Industrial machinery85.8×63 days
Chemicals85.4×67 days
Apparel and footwear84.9×75 days
Packaged food and beverage83.9×95 days
Aequo calculation from SEC EDGAR XBRL company facts retrieved 2026-10-23: cost of revenue ÷ average of opening and closing accounts payable, median per industry. A small named sample of large US-listed companies; see /research/days-payable-outstanding-by-industry for every company.

What a high or low AP turnover ratio means

A high ratio means you pay suppliers quickly; a low ratio means you take longer. Compare the ratio with your agreed payment terms and its own trend, not with a universal target.

  • Higher than your terms imply: you may be paying early without a discount, which uses cash for nothing, or you are taking discounts that are worth it.
  • Lower than your terms imply: bills are probably being paid late, often because approvals stall. Check the AP aging report for past-due items.
  • Falling over time: either suppliers agreed longer terms, or payment is slipping. Ask which.

Frequently asked questions

What is the accounts payable turnover formula?

AP turnover = total supplier purchases on credit ÷ average accounts payable. Many people use cost of goods sold in place of purchases because it is on the income statement. Average AP is (opening AP + closing AP) ÷ 2.

Is a high accounts payable turnover ratio good?

A high ratio means suppliers are paid quickly. That is good if you are taking early-payment discounts or have short agreed terms, and wasteful if you simply pay before bills are due. A ratio that is falling may mean bills are being paid late.

How do you convert AP turnover to days?

Divide the days in the period by the turnover. A turnover of 8 a year is 365 ÷ 8 = 45.6 days, which is the same figure as days payable outstanding when both use the same inputs.

Should I use purchases or cost of goods sold?

Purchases is more accurate, because accounts payable arises from purchases, and it adjusts for inventory you bought but have not sold. Cost of goods sold is easier to find. Choose one and use it every period.

What is the difference between AP turnover and AR turnover?

AP turnover measures how often you pay off supplier balances; accounts receivable turnover measures how often customers pay off theirs. AR turnover = credit sales ÷ average accounts receivable.

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Related guides and tools

Sources

Checked on October 30, 2026. Vendor capabilities and prices change; confirm current details with each vendor.

  1. U.S. Securities and Exchange Commission, EDGAR Application Programming Interfaces (XBRL companyfacts) — accounts payable and cost of revenue for 56 US-listed companies, retrieved 2026-10-23