RE: [CANSLIM] P/S ratios

From: "Fred Richards" <ffradrich@attbi.com>
Subject: RE: [CANSLIM] P/S ratios
Date: Thu, 27 Mar 2003 15:56:38 -0600

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Robin,

That is a state secret that you just let out!  Be careful, the CPA's
don't want us to learn about this.

Fred Richards

- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com] On Behalf Of Robin Gridley
Sent: Thursday, March 27, 2003 1:53 PM
To: canslim@lists.xmission.com
Subject: [CANSLIM] P/S ratios


There's another way that Sales can really be jerked around...

It's common practice in distribution for retailers to hold A/P hostage
against returns. The impact is as follows... The distributor/
manufacturer books the sale to the retailer or channel partner and ships
the product. The sale is reported as such on any financials, along with
an accompanying A/R. The retailer/channel partner has payment and return
terms... which are almost always ignored. The usual end result
(especially in a slow market) is that the A/R goes past-due, the
retailer/CP tells the manufacturer/distributor that they are going to
pay in product (product which has long passed it's 
return privileges...), and they haggle it out - usually with the
manufacturer/wholesaler losing and being forced to take product return
in lieu of overdue A/R. You'd be amazed at how long this process can be
milked to the point of almost never having to pay for products!

The net result is that the sales booked in January can easily end up
coming back in August with an accompanying write-off to the A/R asset. 
And it's very difficult to track this through the financials in a way 
that would allow you to predict the real net-sales number.

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