Why Is DSO Rising at Google and Yahoo?
So tomorrow (Tue. 1/31) is Google's big fourth-quarter earnings day, and everybody's waiting with bated breath to see whether the search company's earnings per share come in better than Yahoo's recent "disappointing" (to the Street) results. Personally, I don't care much about EPS at these companies. But I will be watching Google's DSO--that's days sales outstanding, a measure of how long it takes a company to collect the cash it's owed from customers. While the world has been obsessing over earnings at Google and Yahoo, DSO at both companies has quietly risen 20% and 13%, respectively, over the past six quarters. During the same period, average accounts receivable turnover--the number of times a company collects its receivables relative to sales--has dropped 16% and 12%, respectively. These numbers shouldn't set off major alarms, but they shouldn't be ignored either. They mean that Google and Yahoo have actually banked less and less of the revenue that they report each quarter.
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