PriceSmart Inc (PSMT)

Payables turnover

		Aug 31, 2023	Aug 31, 2022	Aug 31, 2021	Aug 31, 2020	Aug 31, 2019
Cost of revenue	US$ in thousands	565,367	512,959	487,041	3,207,140	3,107,350
Payables	US$ in thousands	453,229	408,407	388,791	373,172	286,219
Payables turnover		1.25	1.26	1.25	8.59	10.86

August 31, 2023 calculation

Payables turnover = Cost of revenue ÷ Payables
= $565,367K ÷ $453,229K
= 1.25

The payables turnover ratio measures how efficiently a company manages its accounts payable by comparing the cost of goods sold to the average accounts payable for a period. A higher payables turnover ratio generally indicates that the company is paying its suppliers more frequently, which may be a sign of good financial health and strong supplier relationships.

Based on the data provided for Pricesmart Inc., the payables turnover ratio has been fluctuating over the past five years. In 2019, the payables turnover was 9.42, indicating that the company was paying its suppliers approximately 9.42 times during the year. However, this ratio decreased to 7.44 in 2020, suggesting a decrease in the frequency of payments to suppliers.

The payables turnover ratio then increased to 7.65 in 2021 and further to 8.29 in 2022, indicating an improvement in the management of accounts payable. However, in 2023, the ratio decreased slightly to 8.06, but it still remained relatively high compared to previous years.

Overall, the trend in Pricesmart Inc.'s payables turnover ratio suggests that the company has been effectively managing its accounts payable in recent years, although there was a slight decrease in 2023. It is important to consider other factors such as industry norms and company-specific circumstances when interpreting this ratio, but the general trend indicates a positive relationship with suppliers and effective management of working capital.