Supplier Credit versus Reported Borrowings in Indian Restaurant Companies

Restaurant companies collect cash at the point of sale and pay their suppliers later, so their funding is expected to rest more on supplier credit than on lenders. This paper tests that expectation with standalone balance sheet data of 14 Indian restaurant companies for the financial years 2015 to 2026, which gives 118 firm-year observations. Supplier credit share is defined as trade payables divided by the sum of trade payables and long-term borrowings. The hypothesis that the median share of the companies exceeds 0.50 is tested with a one-sided Wilcoxon signed-rank test, supported by a t-test and a sign test. Ten of the 14 companies are above the threshold and the median share is 0.93. The hypothesis is supported, with a p value of 0.006 for the Wilcoxon test and 0.002 for the t-test, but only weakly by the sign test, which gives 0.090. Trade payables also exceed trade receivables in 12 of 14 companies. When total non-current liabilities replace borrowings, supplier credit no longer dominates, which suggests that lease and other long-term obligations are the larger claim. The findings carry practical meaning for lenders, investors, suppliers and regulators.