Number of days of supplier credit
Average time to payment of suppliers, expressed in
days, according to the following formula:
(44 / (600/8 + 61 + 9145)) x 365
This is calculated by dividing the total amount of
trade payables by the cost of purchasing products, services and goods. Here too
VAT must be taken into account.
It is not possible to calculate the average term of
payment for concise balance sheets because of the way these are made up. A dash
is then shown instead of the ratio.
The credit given by suppliers or time to payment to
suppliers is the other side of the coin. As for the previous ratio, this figure
can be compared with the average for the industry.
Trade practice may very well vary widely from industry
to industry. This ratio is often used by suppliers to assess the payment
practice of potential customers.
For this reason care must be taken into interpreting
the figures. A long time payment may indicate, for example, that the supplier
wishes to demonstrate his confidence in a major customer. However, it may also
mean that the company is in trouble and unable to make rapid payments because it
does simply not have the cash.
The term of payment for suppliers is only calculated
in complete balance sheets.