Days Sales Outstanding Law and Legal Definition

Days Sales Outstanding(DSO) is also known as Collection Period. It 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 for determination of acceptability by the company. For calculation of DSO, only credit sales are to be used. Cash sales are excluded. DSO is calculated: DSO = (Total Receivables/Total Credit Sales in the Period Analyzed) x Number of Days in the Period Analyzed.)