Comparing Two Electronic Toy Companies

Which company is more efficient in collecting cash from its customers?

Between Our Play and Like Games, which company has a higher days of sales outstanding?

Answer:

A LOW days of sales outstanding represents an efficient credit and collection policy. Between the two companies, Like Games is collecting cash from its customers faster than Our Play, but both companies are collecting their receivables less quickly than the industry average.

Days Sales Outstanding (DSO) is a key metric that indicates how efficiently a company is collecting cash from its customers. It is calculated by dividing the accounts receivable by the average daily sales. In this case, Like Games has a lower DSO compared to Our Play, suggesting that Like Games is more efficient in collecting cash from its customers.

The industry average DSO is 5.51 days, which means that both Like Games and Our Play have room for improvement in their credit and collection policies to match the industry average efficiency.