Days Outstanding Calculator

Formula

The formula to calculate the Days Outstanding is:

$\text{D} = \left(\frac{\text{AR}}{\text{CS}}\right) \times \text{N}$

Where:

$\text{D}$ is the days outstanding
$\text{AR}$ is the accounts receivable
$\text{CS}$ is the total credit sales
$\text{N}$ is the number of days

What is Days Outstanding?

Days outstanding, also known as days sales outstanding (DSO), is a financial metric that measures the average number of days it takes for a company to collect payment after a sale has been made. It is an important indicator of a company’s liquidity and efficiency in managing its accounts receivable. A lower DSO indicates that the company is collecting payments more quickly, which can improve cash flow and reduce the risk of bad debts. Conversely, a higher DSO may suggest that the company is experiencing delays in collecting payments, which could impact its financial stability.

Example Calculation

Let's assume the following values:

Accounts Receivable (AR) = $50000
Total Credit Sales (CS) = $200000
Number of Days (N) = 30 days

Using the formula to calculate the Days Outstanding (D):

$\text{D} = \left(\frac{50000}{200000}\right) \times 30 = 7.50 \text{ days}$

The Days Outstanding is 7.50 days.