DSO (Days Sales Outstanding)
The average number of days it takes a company to collect payment after a sale has been made — a key working capital metric.
Also known as: Days Sales Outstanding, Debtor days, Receivable days
One-line definition
DSO measures how quickly a company turns revenue into cash — a rising DSO signals collection issues or aggressive revenue recognition.
Formula
DSO = (Trade receivables ÷ Revenue) × 365
TS relevance
TS teams track DSO trends over 12–24 months. Deteriorating DSO can indicate customer financial stress, disputes, or channel stuffing (inflating revenue near period-end). A spike at year-end vs mid-year is a red flag.
Related terms
Net Working Capital
The normalised level of working capital a target business needs to operate — a direct lever on the purchase price.
DPO (Days Payable Outstanding)
The average number of days a company takes to pay its suppliers — a measure of how effectively payables are managed as a source of working capital funding.
DIO (Days Inventory Outstanding)
The average number of days a company holds inventory before selling it — a measure of inventory efficiency and supply chain management.
Cash Conversion Cycle
The time (in days) it takes a company to convert its investments in inventory and other resources into cash from sales.