A portfolio manager reviews the working capital metrics of a retail chain. The chain's Days Sales Outstanding (DSO) has increased from 25 days to 40 days over the last four quarters, while sales revenue has remained flat. What does this trend most likely indicate about the company's current status?

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Accepted Answer

This is correct. Days Sales Outstanding (DSO) measures how long it takes to collect cash. A rising DSO trend (from 25 to 40 days) despite flat sales suggests customers are taking longer to pay, which may indicate poor collection procedures, channel stuffing (booking sales early), or deteriorating customer credit quality.

A portfolio manager reviews the working capital metrics of a retail chain. The chain's Days Sales Outstanding (DSO) has increased from 25 days to 40 days over the last four quarters, while sales revenue has remained flat. What does this trend most likely indicate about the company's current status?

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