Days Sales Outstanding measures the average number of days it takes a company to collect payment after making a sale. Lower DSO means faster collection. Rising DSO over time may indicate deteriorating receivables quality or loosening credit standards.
DSO = 365 / Receivables Turnover (TTM)
Derived from receivables turnover, which uses TTM revenue divided by average receivables from SEC filings.
A: DSO should roughly match the company's stated credit terms. A company offering net-30 terms should have DSO around 30-45 days. DSO significantly above credit terms indicates collection delays. B2B companies typically have higher DSO (45-90 days) than B2C companies (under 30 days).
A: Rising DSO can indicate the company is extending more generous credit terms to maintain sales, customers are paying more slowly, or receivables quality is deteriorating. It deserves investigation but is not automatically a red flag — seasonal businesses often have naturally fluctuating DSO.
A: DSO is derived from receivables turnover, so any difference in how revenue or receivables are measured propagates into DSO. GeminIQ uses as-filed values for both inputs.
A: DSO is the average number of days a company takes to collect payment after a sale. A company with $10 million of accounts receivable and $80 million of annual revenue has a DSO of 10 / 80 × 365 ≈ 46 days, meaning customers pay, on average, about a month and a half after being invoiced.
A: They measure the same thing from opposite directions. Receivables turnover counts how many times a year receivables are collected; DSO converts that into days. DSO equals 365 divided by receivables turnover, so a turnover of 8 corresponds to a DSO of about 46 days.
A: DSO is accounts receivable divided by revenue, times 365. DIO is inventory divided by cost of goods sold, times 365. DPO is accounts payable divided by cost of goods sold, times 365. Together they give the cash conversion cycle: DSO + DIO − DPO.
Further Reading: Cash Conversion Cycle (CCC): Formula, Components, and Benchmarks
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