Simulations Plus Inc (SLP)

Days of sales outstanding (DSO)

		Aug 31, 2024	Aug 31, 2023	Aug 31, 2022	Aug 31, 2021	Aug 31, 2020
Receivables turnover		8.18	5.84	3.91	4.72	5.60
DSO	days	44.60	62.50	93.35	77.38	65.14

August 31, 2024 calculation

DSO = 365 ÷ Receivables turnover
= 365 ÷ 8.18
= 44.60

The Days Sales Outstanding (DSO) ratio measures the average number of days it takes for a company to collect revenue after making a sale. A lower DSO indicates faster collections, which can be beneficial for a company's liquidity and cash flow management.

Analyzing the trend in Simulations Plus Inc's DSO over the past five years, we observe fluctuations in the metric. In 2020, the DSO stood at 65.14 days, which then decreased to 44.60 days in 2024. This indicates an improvement in the company's collection efficiency, as it takes less time to convert sales into cash.

However, it is worth noting that the DSO figure increased significantly in 2022 to 93.35 days before declining in the subsequent years. This suggests potential challenges in collecting payments from customers during that period. Overall, the downward trend in DSO from 2022 to 2024 signifies an improvement in Simulations Plus Inc's accounts receivable management and cash conversion cycle. Further monitoring of this ratio will be important to assess the company's effectiveness in managing its receivables going forward.