days sales outstanding (DSO)

The number of days, on average, that it takes a company to receive payment for a sale made. It is calculated by dividing the average accounts receivable by the total value of credit sales for a given period and multiplying the result by the number of days. A high figure indicates possible delays in receiving payments, which could cause a cash flow problem for the company. The days sales outstanding figure falls under the liquidity ratio umbrella and helps investors evaluate how effective a business is at collecting cash from customers that paid on credit.