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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 77.80-0.3%Nov 17 3:59 PM EST
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To: Tulvio Durand who wrote (48079)2/6/2001 7:28:34 AM
From: RetiredNow  Read Replies (1) of 77400
 
Hi all, I just want to clarify how increasing AR allowances or increasing INventory allowances can help a company save up their nuts for a wintery day.

I'll need some help from the accounting gods on this thread, because it has been many years since I was a practicing CPA. In prior quarters, a company will increase their AR allowances and inventory reserves, which are credits. Then they will debit bad debt expense and inventory obsolescence, etc., which lowers net income in the quarter in which they do it. Then when a bad quarter comes around, they say they are reversing their allowances and reserves to bring the numbers in line with figures that more accurately represent the true state of affairs. This means they credit those same expense accounts, which actually increases net income and EPS. Accounting gods, pls verify my assertions here.

So if Cisco is playing these kinds of games, then we should see a % INCREASE in inventory and AR in excess of the %age increase in revenues. We should also see DSO rise. That would be the red flag that they are eating some of their saved nuts this quarter to bail them out of a bad situation. Everyone should watch for this to get a clue as to what really is going on.

I am pretty sure this is how it works, but if I am wrong pls post a response, so that we can all get it right before the conference call. That way we can all evaluate what they are doing. Thx!
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