Accounts Receivable DSO (Days Sales Outstanding) refers to the average number of days it takes for a company to collect payments from its customers after making a sale on credit. It is calculated by dividing the ending accounts receivable balance by the total credit sales and then multiplying by the number of days in the period. A lower Accounts Receivable DSO indicates quicker collection of receivables, which can improve cash flow and liquidity, whereas a higher DSO suggests slower collections and potential cash flow challenges.
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