Lamar Lumber Company has sales of $10 million per year

credit terms calling for payment within 30 days;

Its accounts receivable are $2 million
Now letus find out Lamars DSO
Sales = $10,000,000; A/R = $2,000,000; DSO = ?
DSO =Recivable/Sales/365
=$ 2,000,000 / $ 10,000,000/365
=73 days.
If all customers paid on time (assuming that it makes no sense for customers to pay
earlier than 30 days), then the firms DSO = 30 days. If customers paid on time, the
firms A/R = 30 $10,000,000/365 = $821,917.81.
Cash freed up = $2,000,000 $821,917.81 = $1,178,082.19.