DSO

DSO, or Days Sales Outstanding, is a financial metric used to measure how long it takes a company to collect payment after making a sale. It indicates the efficiency of a company's accounts receivable management. A lower DSO means the company collects payments more quickly, which is generally favorable for cash flow. Conversely, a higher DSO may suggest that a company is struggling to receive payments from customers. To calculate DSO, you divide the accounts receivable by the average daily sales. This metric helps businesses gauge their financial health and operational effectiveness.