Central Garden & Pet Company (CENT)
Payables turnover
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Cost of revenue | US$ in thousands | 2,363,240 | 2,346,280 | 2,332,780 | 1,898,950 | 1,678,960 |
| Payables | US$ in thousands | 190,902 | 215,681 | 245,542 | 205,234 | 149,246 |
| Payables turnover | 12.38 | 10.88 | 9.50 | 9.25 | 11.25 |
September 30, 2023 calculation
Payables turnover = Cost of revenue ÷ Payables
= $2,363,240K ÷ $190,902K
= 12.38
The payables turnover ratio measures how efficiently a company is managing its accounts payables. Central Garden & Pet Co.'s payables turnover ratio has been consistently improving over the past five years, with a noticeable increase from 2019 to 2023.
In 2019, the payables turnover ratio was 11.25, indicating that the company turned over its payables approximately 11.25 times during the year. This means that, on average, it took around 32.44 days (365 days/11.25) for the company to pay off its accounts payables.
Subsequently, the payables turnover ratio increased to 9.25 in 2020, then to 9.50 in 2021, and further to 10.88 in 2022, reflecting an improvement in managing its payables. Notably, by September 30, 2023, the payables turnover ratio peaked at 12.38, indicating a more efficient management of payables as the company was able to accelerate the rate at which it paid off its suppliers.
A higher payables turnover ratio generally signifies a shorter period in which the company pays off its suppliers, which may be a positive indication of strong bargaining power with suppliers or effective cash flow management. However, a very high ratio could also indicate an overly aggressive approach to managing payables that might strain relationships with suppliers.
It's important to note that the trend in payables turnover over the past five years suggests that Central Garden & Pet Co. has been increasingly effective in managing its accounts payables. Nonetheless, the absolute interpretation of the ratio should be assessed in the context of the industry, company's payment terms with suppliers, and other financial metrics.
Peer comparison
Sep 30, 2023