Lesson Plan

• Calculate average trade receivables, the turnover ratio, and days sales outstanding (DSO) from given financial data.
• Interpret DSO results to evaluate the effectiveness of a business’s credit control and cash‑flow position.
• Identify common calculation pitfalls such as using total sales instead of net credit sales or omitting the average‑receivables step.
• Explain how DSO compares to industry benchmarks and suggest appropriate credit‑policy adjustments.

• Projector or interactive whiteboard
• Printed worksheet with sample data (net credit sales, opening & closing receivables)
• Calculator or spreadsheet software
• Whiteboard and markers
• Excerpt of a company’s financial statements
• Exit‑ticket slips or digital quiz platform

Start with the question, “How many days do you think it takes a business to collect cash from its customers?” Review that trade receivables arise from credit sales and that faster collection improves cash flow. Explain that today’s success criteria are to calculate DSO accurately and to interpret what the figure tells us about credit control.

1. Do‑now (5 min): Students estimate a collection period for a well‑known retailer and share answers.
2. Mini‑lecture (10 min): Define trade receivables, net credit sales, DSO and present the three key formulas.
3. Guided practice (12 min): Walk through the ABC Ltd. example together, completing each calculation on the worksheet.
4. Independent practice (10 min): In pairs, students calculate DSO for a new data set using calculators or a spreadsheet.
5. Interpretation discussion (8 min): Groups compare their results to an industry benchmark and propose credit‑policy actions.
6. Check for understanding (5 min): Quick quiz/exit ticket with three questions on formulas, pitfalls, and interpretation.

Recap that DSO measures how quickly credit sales are turned into cash and that a lower number generally indicates better credit control, though extremes may signal overly strict terms. For the exit ticket, each student writes one actionable recommendation for a business with a high DSO. Homework: complete a worksheet calculating DSO for a different company and write a brief paragraph interpreting the result.