Monday, June 18, 2012

DSO (Daily Sales Outstanding)

A company has Daily Sales Outstanding (DSO) of 20 days. The company’s average daily sales are $20,000. What is the level of its accounts receivables? Assume there are 365 days in a year.

Accounting Answer and DSO equation:

Formula for daily sales outstanding = Account Receivables / Average Sales Per Day

DSO (Daily Sales Outstanding) =  20 days
Average Daily Sales = $20,000
Account Receivables =    ?

 DSO 20 days = AR/$20,000

 Level of Accounts Receivable = 20 X $20,000 = $400,000

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