Days Sales Outstanding (DSO)

Days sales outstanding is the average number of days a company waits to collect payment after making a sale: DSO = (accounts receivable / revenue) x 365. Lower means faster cash.

DSO is where revenue quality shows up. Two companies can book identical sales, but the one collecting in 35 days funds itself while the one collecting in 95 days is financing its customers. Rising DSO against flat sales is a pattern auditors and short sellers both hunt for — it can mean stretched customers, credit terms loosened to juice bookings, or invoices that were never as solid as the revenue line implied.