I was looking at the filings again, to try and look at this from a
different perspective.
The most recent 10-Q (for period ending 3/31/98) has for its sales
figures a year over year comparison (Q1 to Q1), while for the balance
sheet items, it is done on a sequential basis (Q4 to Q1). Doesn't it
make the comparison of inventory and sales growth more meaningful if
the periods are matched? I would like some input on this, if
anyone can add something.
So I did just that, and here's what we have:
Q1(3/31/97) Q1(3/31/98) % Change
----------- ----------- --------
Sales: 6,364 7,756 + 21.9%
Inventory: 4,490 4,524 + 0.8%
Receivables: 3,163 4,469 + 41.3%
So with this scenario, where the time periods are better matched, the
problem shifts from that of inventory to accounts receivable.
From Financial Shenanigans:
"If accounts receivable are growing much faster than sales, it
usually means that the company is having trouble collecting from
customers. If the condition persists, the company will eventually
experience negative cash flows."
Actually, this is the situation that developed at Sunbeam (SOC) in the
third quarter. Sales were up 24.7%, but receivables were up 58.9%.
That was the first warning, then Stuff hit the fan in the fourth
quarter, with Inventory up 57.9% and Receivables up 38.5%, while sales
were up only 25.7%.
Can anyone else comment?
Regards,
Rainier |
