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Wednesday, January 2, 2019
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Friday, December 28, 2018
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Thursday, December 27, 2018
A Reminder on Non-GAAP Reporting Rules

Monday, December 17, 2018
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Wednesday, December 12, 2018
Tracking Brexit Disclosures

Thursday, December 6, 2018
Campbell Soup: Looking Behind the Label

Sunday, December 2, 2018
SEC Comment Letters: The Amazon Example

Wednesday, November 28, 2018
Measuring Big Pharma’s Chemical Dependency

Monday, November 26, 2018
Analysts, Can You Relate? A True Story

Monday, November 19, 2018
Digging Up Historical Trend Data: Quest Example

Sunday, November 11, 2018
Cost of Revenue, SG&A: Q3 Update

Monday, November 5, 2018
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Saturday, November 3, 2018
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Wednesday, October 31, 2018
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Tuesday, October 30, 2018
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Sunday, October 28, 2018
Finding Purchase Price Allocation

Sunday, October 21, 2018
Charting Netflix Growth in Three Ways

Wednesday, October 17, 2018
Interesting Data on Interest Income

Thursday, October 11, 2018
The Decline of Sears in Three Charts

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Like you, we here at Calcbench are big fans of getting paid in a timely manner. So the other day we got to wondering—how is Corporate America doing on that front, anyway?

Alas, perhaps not so good.

A metric that helps to answer that question is the “payables turnover” ratio, a figure that gives you a sense of how quickly a company pays its suppliers. It’s calculated by taking the total purchases made from suppliers and dividing that number by your average accounts payable amount in the same period. If the ratio is declining from one period to the next, that means a company is taking longer to pay its suppliers.

Well, we did a quick analysis of the S&P 500 that have filed 2015 financial statements so far (360 companies) to see how their ratios have fluctuated over the last four years—and that ratio has indeed declined, from an average of 12.14 in 2012 to 8.36 in 2015. That is a drop of 31.1 percent.

The median ratio fared better, rising from 6.08 to 6.49. So it could be that a few large swings caused by a small number of filers skewed the average, while a larger number of companies are still getting the check in the mail relatively promptly.

The reasons why the payables turnover ratio might decline will vary from one company to the next, and those reasons can be both good or bad. For example, a company in financial distress might be paying vendors more quickly because those vendors are imposing harsher contract terms. Then again, a company might also pay vendors more quickly to take advantage of early-payment discounts; or because the collections team is doing a stellar job of bringing in lots of cash, which can then be paid to suppliers.

Individual companies’ ratios varied enormously within the S&P 500. In the “bottom” quartile of the 360 companies we sampled (which actually had the lowest ratio, because that indicates the slowest payments) the average ratio was 2.15. In the top quartile, the average ratio was 18.31.

For investors or financial analysts examining a company, the more important consideration is the ratio’s stability over time. Sharp fluctuations across a few reporting periods indicate volatility, and volatility will warrant further analysis.

Calcbench users can conduct their own XBRL-based analysis by visiting the Normalized Data page on our website; then choose the peer group you want to analyze (or build your own); select the calendar year you want to study; and then select “payables turnover” from the list of ratios available on our Ratios pull-down menu. That’s all there is to it.

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