Peter you wrote:
<< Last years receivables on the balance sheet were $21,098 and this years $50,349. The expansion of receivables was the difference $29,251... What I don't understand is the cash flow section reports $15,932 vs $29,349????>>
The increase in the balance sheet items that are due to acquisition of companies are accounted for under the line item "Acquisition of Business". The difference in receivables that you mentioned is probably this. Which is primarily the Chempower acquisition.
Also, acquisitions have not produced the negative operating cash flows. The largest use of working capital listed under "Cash flows from operating activities" is the $14,000,000 Note Receivable from the sale of Eco's 50% interest in MART. I consider this to be somewhat of a unusual and nonrecurring item.
Also, most of the remaining negative cash flow from operations is due to the increase in receivables ($15,932), which is due to the large portion of sales in the fourth quarter. $70,703K vs an average of $49,925K for the first 3 quarters. At 11/30/97 the DSO of receivables, based upon the last quarters sales is about 64 days, which isn't bad and is even better then the DSO at 11/30/96.
Overall, in contrary to Duncan's opinion, I do not think that Eco's operating cash flow a big problem. I do think that Eco's continued increasing use of cash for investments, $9,142K and Notes receivable $46,335K, totaling $55,477 is a problem and a poor use of cash.
Without these investments, Eco could have easily passed muster with their banks and pulled off the DBCO acquisition. |
