Days Sales in Receivables Index Last Year

The Days Sales in Receivables Index is an earnings quality metric that can be used to analyse whether earnings quality is rising or falling. The metric is calculated as the ratio of this year's Days Sales in Receivables versus last year's Days Sales in Receivables.

Stockopedia explains DSRI

The Days Sales in Receivables Index can be used to gague trends in the earnings quality of a company. If the index value is greater than 1, this indicates that receivables are higher this year compared to last year. When receivables constitute a higher portion of sales, earnings are likely to be less sustainable and are considered lower quality.

Professor Messod Beneish found that a disproportionate increase in receivables may suggest that a company is inflating sales figures by booking sales earlier or by extending better credit terms to customers and so on. In Beneish's study the average Days Sales in Receivables Index for companies that were not manipulating earnings was 1.031, as compared with 1.465 for earnings manipulators.

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