Days sales outstanding and Enterprise: Difference between pages

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imported>Doug Williamson
(Expand explanatory penultimate sentence.)
 
imported>Doug Williamson
(Link with Enterprise risk management page and concept.)
 
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(DSO).
#A commercial entity, especially when considered as a whole.
 
#'Enterprise value' is the total value of a commercial business, whether funded by equity alone or by a combination of equity and debt. Also known as 'entity value'.
A credit measurement ratio calculated by dividing accounts receivable outstanding at the end of time period by the average daily credit sales for the period.
#One of the 'factors of production' in economics, the others classically being labour, land and capital. In this context, 'enterprise' refers to taking the risks involved in organising other resources for the production of goods and services.
 
 
<span style="color:#4B0082">'''Example 1'''</span>
 
Accounts receivable = EUR 50m.
 
Daily credit sales = EUR 2m.
 
 
Then Days sales outstanding:
 
= 50 / 2
 
= 25 days.
 
Based on <u>annual</u> total sales - or total sales for any other period - the calculation is modified appropriately for the length of the time period in days (for example 365 days per year).
 
 
<span style="color:#4B0082">'''Example 2'''</span>
 
Annual credit sales = EUR 730m.
 
Accounts receivable = EUR 50m.
 
 
Then Days sales outstanding:
 
= (50 / 730)  x  365
 
= 25 days (as before).
 
 
A lower result is generally considered desirable, although the business needs to ensure it does not put itself at a competitive disadvantage to other businesses which offer easier credit terms to customers.
 
 
DSO is also sometimes known as Days billing outstanding (DBO) or Days receivables outstanding (DRO).




== See also ==
== See also ==
* [[Credit]]
* [[Enterprise risk management]]
* [[Debtor days]]
* [[Entity]]
* [[Ratio analysis]]
* [[Factors of production]]
* [[Labour]]
* [[Land]]
* [[Capital]]

Revision as of 11:58, 22 June 2015

  1. A commercial entity, especially when considered as a whole.
  2. 'Enterprise value' is the total value of a commercial business, whether funded by equity alone or by a combination of equity and debt. Also known as 'entity value'.
  3. One of the 'factors of production' in economics, the others classically being labour, land and capital. In this context, 'enterprise' refers to taking the risks involved in organising other resources for the production of goods and services.


See also

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