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Strategies & Market Trends : Floorless Preferred Stock/Debenture -- Ignore unavailable to you. Want to Upgrade?

To: David Sirk who wrote (635)	7/10/1999 5:32:00 PM
From: Zeev Hed	Read Replies (3) \| Respond to of 1438

David, slow down, here is a quote from their news release: "AVF currently has over $3.5 million in assets, of which $3.1 million is in accounts receivable. " and the it says: "Its current gross sales are approximately $200,000 per month with a profit margin of 50%." Now, Account receivable is not future business, it is services rendered for which they are owed (if you remember the total assets were about $3.5 MM, for which CLEVE is paying $3.95 MM) but have not been paid, If we assume that they have been selling at the same $200 K per month for the last 15 months, it means this outfit maybe making gross 50% but never gets to see that money. Do you understand this simple trick of accounting, you are "profitable" but you make no money? It is quite common, unfortunately. Thus my conclusion is that your friend the lawyer has never run a business before, otherwise he would not crow about 15 months plus of accounts receivable in a PR that is supposed to laud his "efforts". This is not laudable, it is laughable. If now he has 1 truck and it is costing him $100,000 per month (the other part of the 50% is called costs), and he will have 10 such trucks, it will costs him $1 MM per month, or $12 MM per year, and since he does not see the money for 15 months, he'll have to find some place, $15 MM to finance these receivable. Does he think about this? Zeev