Glossarytaught in M2.02
Days sales outstanding
Also called DSO, debtor days, receivable days.
How long the company waits to be paid, measured as receivables divided by revenue, multiplied by 365.
An exporter with ₹640 crore of receivables on ₹4,800 crore of revenue collects in about 49 days.
Read the trend, because the industry sets the level. A software services firm at 70 days is normal, a cash-and-carry retailer at 70 days is a fraud investigation. A rising number is never normal at a company reporting accelerating revenue growth, because it means the growth is being financed by the customers' unwillingness to pay for it.
Two refinements make the figure sharper. Use the average of opening and closing receivables where the balance moved a lot. And where revenue is seasonal, compute the ratio on the last quarter's sales annualised, because a March-quarter push is invisible in an annual average.
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