Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Mark Marcellus who wrote (16771)	4/8/2003 3:22:00 PM
From: Bob Rudd	Respond to of 78652

The key takeaway for me in the article is not whether Dell is 'right' or 'wrong' in the way they treat inventories. It's the large difference that what would seem a subtle difference can make. Inventory turns [& similar] are a critical metric for nearly all goods selling entities. Dell gets very high marks for doing it better than anyone else, so it appears that there's little focus on this 'subtle' distinction. The relationship between those that craft financial reports and those that analyze them is somewhat adversarial. The CFO wants a high stock price and cheap capital so he seeks to present data in the most favorable light [without crossing lines that would send him to the hoosegow in most cases]. The analyst/investor wants to see thru the prettiness to the reality of the situation so that reality doesn't reveal itself to him as a 'buying opportunity' when he owns the stock [Ouch!]. Rising DSO's and inventories are such well-known red flags, that companies resort to more subtle approaches to 'pretty-up' their operating stats. This is a good example. Checking the footnotes for how goods selling companies recognize revenues and deal with inventory in transit...that's the key takeaway, especially when high turns is a key metric for a co.