Glossary
Days sales outstanding estimates how long on average it takes a company to collect payment after a sale, derived from accounts receivable and revenue.
Days sales outstanding (DSO) estimates how many days, on average, it takes a company to collect cash after making a sale. It is computed from accounts receivable and revenue: receivables divided by revenue, multiplied by the number of days in the period. A DSO of 45 means the company waits roughly 45 days to get paid.
DSO is a working-capital and collections signal. A rising DSO can mean a company is extending more credit to customers or struggling to collect, both of which tie up cash. It is derived purely from balance-sheet and income-statement figures and has nothing to do with trading volume.
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