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Technology Stocks : MRV Communications (MRVC) opinions?
MRVC 9.975-0.1%Aug 15 5:00 PM EST
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To: Netnut7 who wrote (11669)1/14/1999 2:17:00 AM
From: Dennis R. Duke  Read Replies (1) of 42804
 
A/R is Accounts Receivable - what customers owe the company for goods and services delivered by the company. A good measure of A/R is DSO. Days Sales Outstanding (DSO) is the number of days sales, working backwards in time from the Balance Sheet date, in the then outstanding Accounts Receivable balance. So DSO sort of tells you where the A/R came from. Changes in DSO are significant and should be understood as to why they occurred.

So if the A/R raised and Sales are raising too then DSO may not change. If all the sales for a quarter are booked on the last day then DSO looks weird and needs to be explained, and timing of sales within a quarter can have effects on DSO. If the company were stuffing the sales into the quarters then DSO would progressively rise and someone should be questioning why that asset is not being turn into cash to run the business. Rising DSO could also be a extension of credit terms (ASND, in getting European orders, extended the payment term on the A/R as a competitive move to get the business).

Ultimately A/R needs to be turned into Cash for the business or written off as uncollectible. A rising DSO with no explaination means the asset is worthless and won't be realizied as cash. But that does not mean that you and I as investors always know the answers that management better have on this issue.

Hope this helps!

Later, (-8 Dennis 8-)
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