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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: Mike Buckley who wrote (30423)	8/24/2000 5:59:52 PM
From: Thomas Mercer-Hursh	of 54805

Are you telling me that a company will legitimately put A/R on its balance sheet for which there is no invoice? And that that practice meets the muster of an independent audit? In the company's own detailed financials, the WIP will show up in its own account, but is an asset and would typically be up there in the current asset section. With the published financials, a lot of summarization goes on and so I can see the A/R figure including both, though I don't know for a fact that this is common practice. I can make arguments both ways. I most contexts it is very much like A/R in the sense that it is work performed and goods delivered for which the customer owes money, it just happens that the payment schedule agreed on means that it isn't due now. The bad part is that if it is a significant figure, it will inflate DSO. Except for very long term construction contracts and/or contracts where there is significant risk that one will not be paid for work performed (like bad debt, except that one migh tnever present the bill because goals weren't met or whatever), A/R and WIP are like stage one and stage two receivables.

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