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Non-Tech : Tyco International Limited (TYC)
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To: Howard Salwen who wrote (3629)1/29/2003 5:00:22 PM
From: rich evans   of 3770
 
Tyco working capital/balance sheet metrics need work.Under Koz, he and others kept saying how lean and mean the operating companies were. Breen at last CC however said working capital,balance sheet metrics need lots of work. Breen was right if one looks at last report. The collection of accounts receivable (Day sales outstanding) are about 60 days( divide annualized sales-36bill- by AR-6 bill) This is lousy. Should be about 40 days. The Payment of bills is a quick 43 days(Days Payables outstanding)(divide annualized COGS (23bill) by AP-2.8bill). The inventory turns are only 7.5(divide annualized COGS by 4.9 bill inventory) This is lousy especially with large service portion. This is 47 days to turn inventory. This should be closer to 12 turns you would think or 30 days. The cash recycle then becomes IT=47days+DSO=60 days- DPO=43days which equals 63 days. This is awful. Should be in the 30 day range you would think and if you reverse the DPO and the DSO so you would pay later and collect early you would get this. At least they should collect in 40 days about and pay in about 50 days. And if inventory were turned in at least 40 days they would have a respectable cash recycle in 30 days. Breen was right- working capital- balance sheet metrics stink and he said he would do something about it. What do the CPAs here think?
Rich
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