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Technology Stocks : Remedy Taking a hit why?
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To: Kent Bragg who wrote (77)1/28/1997 11:36:00 PM
From: Larry Abrams   of 763
 
DSO is a financial analysis term for Days Sales Outstanding
RMDY's just reported a DSO of 74.6 days, which is calculated
by dividing Accounts receivable by daily sales. In RMDY's
case it was AR = 24.2 M divided by daily sales of
29.6 M sales in the Q divided 91.25 days or (24.2)/(29.6/91.25)
= 74.6 days.

On the surface, DSO rising means that customers are taking
longer to pay. Financial analysts (and auditors) become
suspicious of the "quality" of a company's sales figure when its DSO is high relative to others in its group or is rises significantly.

DSO can rise significantly Q to Q if it product is faulty and
customers won't pay (somewhat common in high-tech (ie high dreck)

DSO can rise due to something called back-end loading...a high
proportion of sales shipped in the last week of the Q.

DSO can also rise or be chronically high due to "channel stuffing"
getting friendly distributors to take product, stating nominally
that payment is in 30 days, but informally let them know
that they don't have to pay for 60 to 90 days. Channel stuffing
has been known to occur in the package software industry.

RMDY is unique in the Enteprise-Level Customer Support Software
group in that it sells a lot indirectly through VARs.
CLFY's DSO went up, according to analysts, because of back-end
loading--shipping a lot during the last few weeks of the Q.
In the case of RMDY, one wonders whether their DSO went up
because VARs know that they can accept a lot of product and
don't have to pay until 74.6 day, on average.
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