How to Use the Days Payable Outstanding Metric to Calculate Working Capital

Days payable outstanding (DPO) is an efficiency ratio that measures the average number of days a company takes to pay its suppliers. It is important because it is a key component in a company's formula for calculating working capital. "However,” explains Wayne Smith, founder and president of Working Capital Concepts, LLC, “in order for data such as DPO to be of value, it must be used in a context and compared to other data, either internally or externally. It must also be used strategically so…