Days Sales Outstanding
Measures the average number of days it takes a company to collect payment after a sale has been made. Days Sales Outstanding (DSO) can indicate the efficiency of the company's accounts receivable and the quality of its customer base. High DSO may mean longer cash conversion cycles or potential issues with credit policies.
(Accounts Receivable / Total Credit Sales) x Number of Days
If accounts receivable is $10,000 and total credit sales are $20,000 for a 30-day month, DSO = (10,000 / 20,000) x 30 = 15 days.