Days Sales Outstanding

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Days Sales Outstanding (DSO) is a measure of how long it takes a company to collect its receivables. It is calculated by dividing the average accounts receivable balance by the daily sales revenue. A high DSO indicates that a company is having difficulty collecting its receivables, which can lead to cash flow problems. A low DSO indicates that a company is collecting its receivables quickly, which is a sign of good financial health.

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DSO is an important metric for businesses to track because it can help them identify potential cash flow problems. A company with a high DSO may need to take steps to improve its collections process, such as sending out invoices more quickly or offering discounts for early payment. A company with a low DSO may be able to use its cash flow to invest in new growth opportunities or return money to shareholders.

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DSO is also used by investors to evaluate a company's financial health. A company with a high DSO may be seen as a riskier investment because it is more likely to have cash flow problems. A company with a low DSO may be seen as a more attractive investment because it is more likely to be able to meet its financial obligations.

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DSO is a valuable metric for businesses and investors to track. By understanding DSO, companies can improve their cash flow management and investors can make more informed investment decisions.