Which metric measures the average number of days to collect payment after a sale?

• A. DSO
• B. DIO
• C. DPO
• D. CCC

Answer: (A)

The key concept here is liquidity tied to receivables: it measures how long, on average, customers take to pay after a sale. The metric that captures this is the days sales outstanding (DSO). It reflects the average collection period and is directly tied to accounts receivable and credit sales. A lower DSO means faster collections and stronger short‑term liquidity, while a higher DSO indicates slower collections.

In practice, you estimate DSO as the average accounts receivable divided by the average daily credit sales (or, equivalently, by net credit sales times the number of days in the period). For annual data, you’d typically compute (average accounts receivable / net credit sales) × 365. This gives you the typical number of days you wait to collect payment.

Other metrics measure different parts of the operating cycle. Days inventory outstanding tracks how long inventory sits before it’s sold, not how long customers take to pay. Days payable outstanding measures how long you delay paying suppliers. The cash conversion cycle combines these into a single net number, but the specific question—average days to collect payment after a sale—points to DSO as the best fit.