Quick Finance Tip - Days Sales Outstanding (DSO)

• Days Sales Outstanding is an Activity Ratio. 
• What Does It Tell Us: How many day it takes to collect the revenue that was recognized.
• Formula: Days / Receivables Turnover

Ratios provide insights to:

1. Economy and Economic Relationships
2. Financial Flexibility
3. Relative Perspectives of Financial Performance (over time); and
4. Comparability with peers.

Shortcomings or limitations includes:

1. Hetero or Homogenitiy of Operating Activities
2. Continual Questioning of Consistency
3. Judgement Calls with Financial Statement Implications