What does it mean if days sales outstanding (DSO) increases?
Days sales outstanding (DSO) measures how many days it takes for a company to collect the cash from customers who paid on credit. The company should aim to have DSO be as low as possible. If DSO increases, it could be an indication that the company’s customers are having cash flow issues (and potentially going bankrupt!) and they can’t pay on time.
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How to calculate days sales outstanding (DSO) or days sales in accounts receivable?
This is a metric that reflects the success that the firm has in collecting receivables that remain outstanding. A higher amount of days will generally indicate that the company is taking a longer amount of time to collect its receivables.
Is it good or bad if DSO for a company increases?
DSO stands for days sales outstanding, and measures how many days it takes for a company to collect cash from customers who paid on credit. If DSO increases, that means customers are taking longer to pay. The company should aim to collect cash as quickly as possible as it allows them to use the cash […]
What is the cash conversion cycle and how is the cash conversion cycle calculated?
The cash conversion cycle is a metric that is used to describe how long it takes for a company to convert its investments in inventory and other resources into cash flows from sales. The cash conversion cycle is considered a metric that expresses the length of time, in days, that is takes for a company […]