Days payable outstanding (DPO) is an efficiency ratio that measures the average number of days a company takes to pay its suppliers.
where ending A/P is the accounts payable balance at the end of the accounting period being considered and Purchase/day is calculated by dividing the total cost of goods sold per year by 365 days.
[1] DPO provides one measure of how long a business holds onto its cash.
Having fewer days of payables on the books than your competitors means they are getting better credit terms from their vendors than you are from yours.
Having a greater days payables outstanding may indicate the Company's ability to delay payment and conserve cash.