Days Payable Outstanding (DPO)

Days payable outstanding is the flip side of DSO: the average number of days a company takes to pay its own suppliers. DPO = (accounts payable / cost of goods sold) x 365.

Higher DPO means the company holds cash longer, which shortens its cash conversion cycle and shrinks its financing needs. Bargaining power sets the ceiling — a dominant retailer can dictate 75-day terms to suppliers who need the shelf space, while a small manufacturer pays in 30 or loses its vendors. DPO doubles as a rough proxy for who holds the leverage in a supply chain.

Direction matters too. DPO rising because terms were renegotiated is strength; DPO rising because the company cannot pay is distress. The cash flow statement usually tells you which.