Days sales outstanding (DSO)

Definition

Days sales outstanding (DSO) in plain English

When a company makes a sale "on credit," the customer takes the product now and pays later, and that unpaid promise is an "account receivable." Days sales outstanding measures how many days, on average, the company waits to actually collect that cash: you divide the money customers owe by the company's daily sales. A DSO of 45 means it takes about a month and a half to get paid after a sale — like lending a friend money and tracking how long until they finally hand it back. Lower is better, because money you're still waiting on can't be spent or invested yet.

Related Principles of Finance terms

• Altman Z-score
• Asset turnover
• Basel III
• Cash conversion cycle
• Cash flow from operations (CFO)
• Cash ratio
• Current ratio
• Days inventory outstanding (DIO)
• Days payable outstanding (DPO)
• DuPont decomposition