“Comment, question or quotation of the day”

18-12-2018 : Daily quote

Nobody on Wall Street knows how to predict the financial markets.
Bernard Madoff

17-12-2018 : Question asked on the Vernimmen.com website

Why in a construction company stocks are low and how to track the work-in-progress line that is important?   For a construction company, inventories are often low because it is supplied daily by its dealer in building materials, and it is the one which carries the bulk of inventories in this sector.   It is necessary to monitor over time the evolution of the item Work in progress in relation to the item Customer advances; and when Work in Progress grows faster than or exceeds the Customer Advances line, beware. This is either a sign of poor management, because in this sector customers are asked to pay as work progresses and well-managed companies always charge customers a little in advance of the completion of the work. Or the sign of a fraud if losses on a construction work are hidden by an overstatement of Work in progress, which do not forget, are nothing from an accounting point of view but costs that have been taken out of the P&L account to be written into an asset on the balance sheet, which improves the result in the P&L. Have a nice day.  


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The Vernimmen.com Letter

Number 116 of November 2018

News : When accounting impacts on financial management decisions

Statistics : Yield curves

Research : The importance of annual report readability

Q&A : What's a debt wall?

COMMENTS : Comments posted on Facebook