DSO Meaning and
Definition
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DSO is an acronym that stands for Days Sales Outstanding. It is a financial metric used to measure the average number of days it takes for a company to collect payment from its customers after a sale has been made. DSO is a key indicator of a company's liquidity and efficiency in managing its receivables.
In simple terms, DSO represents the average time it takes for a company to convert its sales into cash. To calculate DSO, the company divides the total accounts receivable by the average daily sales. The resulting number indicates the average number of days it takes for the company to collect payment from its customers.
A low DSO is generally favorable as it indicates that a company is efficient in getting paid for its products or services. Conversely, a high DSO suggests that a company is facing difficulties in collecting payment and may have cash flow problems.
DSO is commonly used by businesses to monitor and analyze their credit and collection policies, as well as to evaluate the financial health of their customers. It helps companies to identify potential cash flow issues, improve their collections process, and assess the creditworthiness of customers.
Overall, DSO is a valuable tool for companies in managing their accounts receivable and maintaining a healthy cash flow.
Common Misspellings for DSO
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