Chestnut & Cedar Stock Report

Balance Sheet Analysis

- Leverage and financial
   strength affect share value

- Liquidity concerns can
   decimate a business

- Cash is critical, to a point
    * Window Dressing
    * Cash Gap
    * Cash Per Share
    * Burn Rate

- Marketable Securities

- Receivables are interwoven
    with cash flow
    * Past Dues and Write-offs
    * Receivables turnover ratios
    * Securitizations

- Inventory - focus on the
   profit margins
    * Perpetual vs. Periodic
       Inventory
    * Inventory Accounting
       Calculation
    * Inventory Costing Methods
    * Lower of Cost of Market
    * Inventory Categories
    * Inventory Turnover Ratios

- Fixed assets are necessary in
   order to be a world class
   company

- Liabilities with equity attributes
   are enriching

- Emphasizing debt net of cash
   can be misleading

- Book value is a tool to
    properly evaluate a stock

- Off-balance sheet assets and
   liabilities are legal

Cash Gap

The cash gap is the time between paying for inventory and other bills and collecting cash from the sales of products or services. The company, therefore, needs to cover the shortage by borrowings or raising equity. Stretching payables, utilizing just-in-time inventory or emphasizing credit card payments will lessen the need for financing. The bigger the gap the more resources are needed to cover the shortage; thus, profitability is reduced and leverage increased. The shorter the cash gap, usually the more profitable and efficient the organization, and the higher its market value.

The Cash Gap

Click here for information on:
Window Dressing
Cash Per Share
Burn Rate