Razor, BLWT's revenues were 75% videotape rental, 25% product sales (mostly videos and games)
rental video inventory appears as an asset, but not as a current asset. I don't know why ... maybe because this is an inventory that depreciates.
I figured that this accounting rule knocked down their Z score by 0.54. I think it would be fair to add that back to Z, and then you find that their Z wasn't negative until fairly recently.
Basically they were on thin ice for a long time, and when things started to go wrong with revenues, that's when they folded.
Anyway, it is clear from BLWT's example that even without toxic convertibles, a company can have a Z < 1.8, and indeed a Z that is close to zero, for a long time, as long as a couple of years, before BK. Of course toxic convertibles could have prolonged the demise a while, but BLWT's managers didn't do that.
10Q back in October was quite frank about the co.'s problems: sec.yahoo.com |
