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20 December, 09:06

The main reason that a firm would strive to reduce the number of days sales outstanding is to increase is?

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  1. 20 December, 09:23
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    Cash flow

    Explanation:

    Days sales outstanding (DSO) is the average number of days (from the day sales were made) it takes for an entity to collect cash from credit or receivable customers. It is a financial ratio that is used generally to measure

    how an entity is able to manage its account receivable and improve cash flow. The formula for the calculation of DSO is:

    (Accounts Receivable / Net Credit Sales) x 365

    Apart from the lost of interest on deposit associated with high DSO, entities will enjoy the advantage of increase cash flow when they are able to drive down their days sales outstanding (DSO)
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