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The day count is also used to quantify periods of time when discounting a cash-flow to its present value. When a security such as a bond is sold between interest payment dates, the seller is eligible to some fraction of the coupon amount. The day count convention is used in many other formulas in financial mathematics as well.
Accounts receivable represents money owed by entities to the firm on the sale of products or services on credit. In most business entities, accounts receivable is typically executed by generating an invoice and either mailing or electronically delivering it to the customer, who, in turn, must pay it within an established timeframe, called credit terms [citation needed] or payment terms.
This calculation is sometimes called "True DSO". Instead, days sales outstanding is better interpreted as the "days worth of (average) sales that you currently have outstanding". Accordingly, days sales outstanding can be expressed as the following financial ratio: DSO ratio = accounts receivable / average sales per day, or
Days payable outstanding (DPO) is an efficiency ratio that measures the average number of days a company takes to pay its suppliers.. The formula for DPO is: = / / where ending A/P is the accounts payable balance at the end of the accounting period being considered and Purchase/day is calculated by dividing the total cost of goods sold per year by 365 days.
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Receivable turnover ratio or debtor's turnover ratio is an accounting measure used to measure how effective a company is in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.
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