Days Sales Outstanding (DSO) is a widely used method to help evaluate how effective a company is at collecting receivables. This metric is used to measure the average number of days it takes a company to collect what is owed to them after a sale has been completed. Put in fewer words, it is the average collection period. DSO has always been an emphasis for all companies I have worked and is calculated by
There is much to know about measuring and interpreting DSO;
1. A low DSO indicates the company is collecting receivables quickly and generally a positive sign.
2. A high DSO proves that a company takes longer to collect on credit sales and can indicate current or impending cash flow problems, operational issues, or a lack of effort or focus on credit collections. A healthy DSO is one that is half the payment terms. For example, is payment terms are net 30 and the DSO is 45 day, then this considered good.

The interviewer is looking for your level of familiarity with the term DSO or Days Outstanding. DSO or Days Outstanding and is a measure of the average number of days that it takes a company to collect payment after a sale is made. This metric is a significant one in accounts receivable. DSO Total Accounts Receivable/Total Sales x Number of Days.

"Days Sales Outstanding is a method used to evaluate how active a company is at collecting receivables. This metric is used to measure the average number of days it takes a company to collect what is owed to them after a sale is complete. Put in fewer words; it is the average collection period. DSO has always been an emphasis for all companies I have worked and is calculated by total accounts receivable over total sales, multiplied by the number of days passed. A low DSO is an excellent thing!"