If a firm sells on terms of 2/10 net 30 days, and its DSO is 28 days, then the fact that the 28-day DSO is less than the 30-day credit period tells us that the credit department is functioning efficiently and there are no past-due accounts.

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Quizplus · Accepted Answer

A DSO of 28 days, while within the 30-day credit period, does not necessarily indicate the absence of past-due accounts or that the credit department is functioning efficiently. It simply means that, on average, receivables are collected in 28 days. Some accounts could still be past due, and others paid earlier, affecting the average.

If a Firm Sells on Terms of 2/10 Net 30