Fundamentals

Days Sales Outstanding (DSO)

Days Sales Outstanding measures the average number of days it takes to collect payment from customers after a sale. Lower DSO indicates faster collection and better cash flow. Rising DSO may signal collection problems or deteriorating customer quality.

Formula

DSO = (Average AR / Revenue) x 365

Related Terms

Days Inventory Outstanding (DIO)Cash Conversion Cycle (CCC)

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This term is covered in the following lessons:

Cash Conversion Cycle