Glossary -> Days sales outstanding ratio
Days Sales Outstanding / Average Collection Period
Also called average collection period, the days sales outstanding ratio is calculated as
trade accounts receivable
balance x 365
annual credit sales
The trade accounts receivable amount used in the ratio should be the amount before any deduction for uncollectible accounts.
The following is an example of the calculation:
| Total annual credit sales | $120,000 |
| Year end trade accounts receivable | $30,000 |
| Day's sales outstanding = 30,000 x 365 / 120,000 = | 91.25 |
For a firm with terms of net 30 days, days outstanding of 91.25 would indicate a severe problem in the collection of accounts receivable.
See also accounts receivable turnover and aged accounts receivable.
Revised: October 26, 2023