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    Ali Kara
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    This document discusses three ratios - DSO, DPO, and DIO - that measure the average number of days it takes a company to collect revenue from clients, pay suppliers, and turn inventory into sales. DSO is calculated by dividing trade receivables by revenue and multiplying by 360. DPO divides trade payables by cost of goods sold and multiplies by 360. DIO divides inventory by cost of goods sold and multiplies by 360. These ratios help analyze the efficiency of a company's cash conversion cycle.

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    7.5+Days+ratios

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    This document discusses three ratios - DSO, DPO, and DIO - that measure the average number of days it takes a company to collect revenue from clients, pay suppliers, and turn inventory into sales. DSO is calculated by dividing trade receivables by revenue and multiplying by 360. DPO divides trade payables by cost of goods sold and multiplies by 360. DIO divides inventory by cost of goods sold and multiplies by 360. These ratios help analyze the efficiency of a company's cash conversion cycle.

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    11 views1 page

    7 5+days+ratios

    Uploaded by

    Ali Kara
    This document discusses three ratios - DSO, DPO, and DIO - that measure the average number of days it takes a company to collect revenue from clients, pay suppliers, and turn inventory into sales. DSO is calculated by dividing trade receivables by revenue and multiplying by 360. DPO divides trade payables by cost of goods sold and multiplies by 360. DIO divides inventory by cost of goods sold and multiplies by 360. These ratios help analyze the efficiency of a company's cash conversion cycle.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 1

    “DAYS” RATIOS

    DSO (Days of Sales Outstanding) Trade Receivables


    Average number of days that a
    company takes to collect revenue
    DSO =
    (
    Trade Receivables
    Revenue
    x 360
    ) Generated upon selling products
    and services on credit
    CLIENTS
    Trade Payables
    DPO (Days of Payables Outstanding)
    A company's average payable period
    DPO =
    ( Trade Payables
    Cost of Goods Sold ) x 360
    Generated upon purchasing
    products and services on credit
    SUPPLIERS
    DIO (Days of Inventory Outstanding) Inventory
    How long it takes a company to turn its
    inventory into sales
    DIO =
    ( Inventory
    Cost of Goods Sold ) x 360 The amount of raw materials, WIP, and
    finished products held by the company
    COMPANY

    Suppliers deliver Raw Materials in the Company pays for the Clients buy the Clients pay for the
    Raw Materials company’s warehouse Raw Materials to suppliers finished products finished products

    DPO
    DIO
    DSO

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