Fundamental Glossary / Working Capital & Operational Efficiency
Creditor Turnover Ratio
How many times payables are settled during a period.
Formula
Purchases / average trade payables. Cost of goods sold is sometimes used when purchases are not disclosed.
What it means
Creditor turnover describes how fast the company pays suppliers. A lower turnover means it is taking longer credit.
Supplier credit is a source of funding. Stretching it improves cash in the short run and can cost discounts or supply reliability.
How to read it
Compare creditor days with debtor days. A company that collects in 30 days and pays in 60 is funded by its suppliers. One that collects in 90 and pays in 30 funds its customers.
What to watch
Using cost of goods sold instead of purchases misstates the ratio when inventory is rising or falling. And payables that include capital-expenditure bills are not trade credit.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.