# ABC has Days Sales Outstanding (DSO) of 10.1 days. Annual sales are expected to be 5,545,000....

## Question:

ABC has Days Sales Outstanding (DSO) of {eq}10.1 {/eq} days. Annual sales are expected to be {eq}5,545,000 {/eq}. Using a {eq}365 {/eq} day year, compute the level of the firm's accounts receivable.

## Days Sales Outstanding:

Days Sales Outstanding (DSO) measures the number of days it takes for a firm to receive cash for the goods sold on credit or receivables. A high DSO indicates that the cash of the company is blocked for a longer period which might increase the cash conversion cycle. It would also indicate a poor credit terms of the company. Therefore, DSO is a very important measure in understanding how well the company is managing its receivables.

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Information Provided:

Days Sales Outstanding (DSO) = 10.1 days

Annual Sales = \$5,545,000

DSO is calculated as below

DSO = (Accounts receivables /...

Operating Cycle in Accounting: Definition & Formula

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Chapter 22 / Lesson 42
3.6K

An operating cycle consists of lead time, production time, sales time, delivery time, and cash-collection time. Learn the definitions of the parts of the operating cycle, how long the operation cycles are for different industries, and the formula used for calculating the operating cycle in accounting.