What are the accounts payable turnover ratios at Kellogg, Post, and General Mills?

Source: Wendy Tietz

Source: Wendy Tietz

In a recent New York Times article (“Big Companies Pay Later, Squeezing Their Suppliers,” April 6, 2015), it was reported that several large companies are forcing their much-smaller suppliers to extend longer payment terms. Several large companies, such as Procter & Gamble, Heinz, and Anheuser-Busch, have told their suppliers that they want three or four months to pay their invoices. Companies are taking longer to pay their bills not because they are struggling financially, but because they want to maximize the use of their cash.  These companies are using their suppliers as a financing source, making it part of their business strategy to demand more generous payment terms.

At least one cereal manufacturer has been reported as asking its suppliers for extended payment terms.  Cereal manufacturers in general are facing a challenging market for their cereals.  Cereal consumption peaked in the 1990s according to The New York Times (“Cereals Begin to Lose Their Snap, Crackle and Pop,” September 10, 2014.)  Now cereal sales have declined due to consumer concerns with processed foods, sugar, gluten, and similar issues. In addition, the declining birthrate has hurt cereal sales because children have typically been the largest consumers of cereal. New kitchen gadgets that make creating a smoothie or fresh juice easier also drive down the demand for cereal.

Three of the largest cereal manufacturers in the United States are:

  • Kellogg Company (K)
  • Post Holdings, Inc. (POST)
  • General Mills, Inc. (GIS)

Balance sheets and income statements from these three cereal manufacturers’ most recent financial statements can be found here.

To analyze how long these cereal manufacturers take to pay their suppliers, the accounts payable turnover ratio (cost of goods sold/Average accounts payable) and the days’ payable outstanding (365/turnover) can be calculated.  (Note that, for our purposes here, “average” means that the prior year end balance is added to the current year end balance and that total is divided by two to arrive at the average.)


  1. Calculate the 2014 accounts payable turnover (Equation = Cost of goods sold / Average accounts payable) for Kellogg, Post, and General Mills for the most recent year.
  2. Calculate the 2014 days’ payable outstanding (Equation = 365 / Accounts payable turnover) for Kellogg, Post, and General Mills for the most recent year.
  3. Which of the three companies takes the longest, on average, to pay its accounts payables? Show support for your answer.
  4. Do you think it is ethical for a large company to demand that its suppliers extend its payment terms to 60, 90, or even 120 days?  Why or why not?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

  • Student handout (pdf) (word) (contains entire blog posting + discussion questions)
  • PowerPoint file (brief article overview + discussion questions)

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

About Dr. Wendy Tietz, CPA, CMA, CSCA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Education.

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