Series - Valuing Stocks

A signal that a company's earnings deserve a closer look: Rising cash sales and a cash margin rate that is falling. Cash sales = revenue - increase in a/r. Cash margin = subtract from cash sales the sum of cogs and the increase in inventory, and divide the result by cash sales. A confluence of these 2 trends could mean the company is extending credit to customers to make sales and building excess inventory. Enron showed this in 2000; Cisco also did it and took a huge inventory write-down later.