Days Sales Outstanding (DSO)

Days sales outstanding measures the number of days a company takes to realize payment from a sale. It is determined annually, monthly, and quarterly.

Computing DISO involves dividing the average accounts receivable in a given period by the overall value of credit sales in the same period. The result is then multiplied by the number of days during the period under evaluation.

Days sales outstanding is an essential element in the cash conversion cycle. DISO is sometimes known as the average collection period or days receivables.

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