| A ratio measuring how long on average it takes a company to pay its creditors. Calculated by dividing the trade creditors shown in its accounts by its cost of sales, or sales, and then multiplying by 365. For example, a company with creditors of 900,000 and sales of 12m, takes on average just over 27 days to pay its bills. Within reason, the higher the number the better, although if a company is very slow in paying its creditors (say 100 days plus) it is worth asking if this is because it has problems generating enough cash quickly enough to pay them. Also the UK government has shown concern over slow payment of suppliers, often small companies, by big groups, notably the supermarket chains. The typical number of days will vary between sectors and industries.
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