1. What are DPO and DSO?

DPO (Days Payable Outstanding) measures how long a company takes to pay its suppliers. DSO (Days Sales Outstanding) measures how long it takes to collect payment from customers. Both are important working capital metrics.

2. How the Calculator Works

The calculator uses these formulas:

Where:

• Accounts Payable — Current liability for unpaid supplier invoices
• COGS — Cost of Goods Sold (annual)
• Accounts Receivable — Current asset for unpaid customer invoices
• Sales — Total sales revenue (annual)

Explanation: These ratios convert accounts payable/receivable balances into equivalent days based on the company's cost structure or sales volume.

3. Importance of DPO and DSO

Details: DPO indicates supplier payment efficiency (higher = better cash flow). DSO indicates customer collection efficiency (lower = better cash flow). Together they reveal working capital cycle effectiveness.

4. Using the Calculator

Tips: Enter all values in the same currency. Use annual figures for COGS and Sales. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DPO value?
A: Higher DPO is generally better (up to a point), but varies by industry. Compare to competitors and payment terms.

Q2: What DSO is considered healthy?
A: Typically under 45 days is good, but depends on industry norms and company credit terms.

Q3: Can these be calculated quarterly?
A: Yes, but multiply by 91.25 (365/4) instead of 365 for quarterly figures.

Q4: How do DPO and DSO relate to CCC?
A: Cash Conversion Cycle (CCC) = DSO + DIO - DPO, where DIO is Days Inventory Outstanding.

Q5: Why use COGS for DPO but Sales for DSO?
A: DPO relates to costs (what you owe suppliers), while DSO relates to revenue (what customers owe you).