Days sales outstanding (DSO) is a ratio that measures how long it takes a company to collect payment for its sales on credit. It helps to evaluate how efficiently a company is managing its accounts receivable and its cash flow. The formula for days sales outstanding is:
Days sales outstanding = Average accounts receivable / Net credit sales x Number of days
Where:
- Average accounts receivable is the average of the beginning balance and ending balance of BS005,
bs_accts_rec_excl_notes_rec
- TTM Net credit sales is TM006,
ttm_net_sales
- Number of days is the period of time used to measure DSO, such as monthly, quarterly, or annually