DSO and DSI as forecasters of GPM change

UK Discussion in 'General Accountancy Discussion' started by Ketki, Dec 6, 2017.

  1. Ketki

    Ketki

    Joined:
    Dec 6, 2017
    Messages:
    1
    Likes Received:
    0
    Hi all,

    Bit of a left-field question but thought I'd rack the brains of this forum. On a recent client engagement we were calculating Day Sales Outstanding and Day Sales Inventory as ratios to see any significant changes year-on-year. We noticed that DSO had increased and DSI decreased. The question from my junior was:

    - What do both of these mean when considered with gross profit margin for this year (which had fallen) and are they indicators of where it's likely to move next year (and why)?

    Struggling to provide an answer other than DSO increasing being a sign of potentially worsening customer credit and DSI evidencing less efficient inventory management.

    Thanks
     
    Ketki, Dec 6, 2017
    #1
    1. Advertisements

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments (here). After that, you can post your question and our members will help you out.