DAYS SALES OUTSTANDING (DSO) Definition

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DAYS SALES OUTSTANDING (DSO), also known as Collection Period (period average), is a financial indicator that shows both the age, in terms of days, of a companys accounts receivable and the average time it takes to turn the receivables into cash. It is compared to company and industry averages, as well as company selling terms (e.g., Net 30) for determination of acceptability by the company. DSO is calculated: DSO = (Total Receivables/Total Credit Sales in the Period Analyzed) x Number of Days in the Period Analyzed. Note: Only credit sales are to be used. Cash sales are excluded.

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NET PROFIT is the companys total earnings, reflecting revenues adjusted for costs of doing business, depreciation, interest, taxes and other expenses. Same as Net Income.

LOSS, in finance, is when expenses exceed sales or revenues, i.e. goods or services are sold for less than their cost.

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