A financial health indicator that measures the average number of days it takes on average for a company to pay its bills and other obligations. This ratio is calculated by dividing the number of days in a fiscal year by the accounts payable turnover ratio. The longer a company to pay its bills the greater its current liabilities will be. Notably this debt is normally interest free and is viewed as free cash, and the longer a company can defer its payments to suppliers, the more cash it has available to deploy elsewhere. But this practice is not sustainable with key suppliers. Classified as an activity ratio.
