This glossary uses Visual Finance™ to bring financial terms to life. Each example shows data from the Round Number Company, a fictional business with simplified figures to make learning easier. For more details, visit 'How to Read Visual Finance'.
The Days Sales Outstanding ratio shows how quickly Receivables (i.e. the proceeds fromSales) are converted into Cash. It is the average number of days to receive payment.
Ratio:Receivables divided by the Average Daily Sales
where Average Daily Sales = (Annual zsales/365).
Example: The Round Number CompanySales = 200; Receivables = 40 Average Daily Sales = 200/365 = 0.55 Days Sales Outstanding = 40/.55 = 73 Days |
The ratio shows how quickly the proceeds from sales are converted into Cash.
Days Sales Outstanding is partof theCash Conversion Cycle.
Also known as Average Collection Period or Days Sales In Receivables.
The Visual Finance graphic automatically shows the Days Sales in Receivables.
this is automatically shown on the Visual Finance graphic.
Days Sales Outstanding (DSO) = Accounts Receivable (A/R) /Average Daily Sales
where Average Daily Sales = Sales/365
Example: The Round Number CompanySales = 200; Receivables = 40 Average Daily Sales = 200/365 = 0.548 Days Sales Outstanding (DSO) = 40/0.548 = 73 Days |
Receivables is aso called Accounts Receivable (or A/R). It is often called Debtors outside North America.
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Calculator for Days Sales Outstanding (DSO)
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The above is our generic explanations of common corporate financial terminology. Actual meanings can vary widely from company to company; in order to have the correct internal definition you need to ask your Finance Department, "What do you mean by that?"
term list.