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Strategies & Market Trends : Value Investing
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To: Don Earl who wrote (16066)1/5/2003 11:16:05 AM
From: Bob Rudd  Read Replies (1) of 78576
 
Don: <<Accounts payable have increased by $2 billion in the 9 months ended November 3, and a 10% drop in same store sales is NOT what you want to see at peak inventory levels, especially when the inventory still has to be paid for>>Actually you DO want to see payables rising with inventory because that indicates that vendors are financing the inventory. In tough times, vendors sometimes offer extended terms to retailers to get them to buy more. This is a benefit to the retailer that improves turnover and return on invested capital. The vendor, OTOH, may be considered to be stuffing the channel which is why an outsize AR rise is such a red flag.
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