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investingforbeginners.eu Just as a cautious businessman avoids investing all his capital in one concern, so wisdom would probably admonish us also not to anticipate all our happiness from one quarter alone.
Sigmund Freud

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    Days Sales Outstanding

     

    Days sales outstanding (DSO) shows how quickly company collect its money from sales. Usually company doesn’t get paid immediately; depending on business and distributors network such period may be from several days to several months. The lower ‘days sales outstanding ratio’ is the better, because less working capital is needed. 

     

    ‘Days sales outstanding’ calculation


    Days sales outstanding ratio = (Trade receivables / Sales) * Number of days in period


    If business is dependable on seasons, receivables used for calculation should be average of one year.

     

    If you are interested in 'days sales outstanding ratio', you also should read about 'average collection period', 'days inventory outstanding' and 'days payable outstanding'.

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