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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Bruce Brown who wrote (25956)	6/7/2000 7:33:00 AM
From: DownSouth	Respond to of 54805

BB, I find your discussion with Mike this morning to be absolutely fascinating! Y'all are giving me some new quantitative tools to learn and live with. Thanks. A future valuation junkie.

To: Bruce Brown who wrote (25956)	6/7/2000 12:52:00 PM
From: Seeker of Truth	Read Replies (2) \| Respond to of 54805

In the business world that I know about, 30 day payment doesn't get you the same price as 90 day payment. If it did everybody would insist on waiting 90 days. I assume one could even negotiate a discount for 3 day payment, as opposed to 30 day payment. Doesn't that make the meaning of the flow ratio a bit fuzzy? A company that insisted on a long delay in payments would, ceteris paribus, have a smaller flow ratio because the current liabilities would be greater. Whether this is good or not depends on the interest rates and discounts involved. It's also not a given that a high average number of days before being paid is a bad sign. Suppose the company is using its cash as a marketing tool? Again the meaning of all this depends on how much effective interest the company is charging the buyers who are delaying payments, how credit worthy the buyers are etc. One would have to look deeply into the individual case, so it appears. I think profit margin on sales is a great yardstick, when we compare it with that of companies in the same kind of business. I'm not convinced that I can easily know what the Flow ratio means.