The average number of days to collect payment after a sale. Below 45 days is strong. A sudden increase can signal deteriorating customer credit quality or aggressive revenue recognition.
Formula
Description
Measures the average number of days it takes to collect payment after a sale. Lower DSO means faster cash collection. Rising DSO can indicate deteriorating credit quality of customers or aggressive revenue recognition practices.
Interpretation
Below 45 days is generally strong. Above 90 days warrants investigation. Compare to industry norms, as B2B businesses naturally have higher DSO than B2C. A sudden spike in DSO is a classic earnings quality red flag.
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