The Formula for Days Receivable

Days Receivable, also known as Days Sales Outstanding (DSO), is calculated by dividing the average accounts receivable by total credit sales and then multiplying the result by the number of days in the period. This metric provides insight into how efficiently a company collects payments from its customers after making a sale. A lower Days Receivable value suggests faster cash conversion and effective credit management, while a higher value may indicate delayed payments and potential cash flow challenges.