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GuruFocus has detected 2 Warning Signs with Tesco PLC $TSCDY.
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Tesco PLC (OTCPK:TSCDY)
Accounts Receivable
$1,844 Mil (As of Feb. 2017)

Accounts Receivable are created when a customer has received a product but has not yet paid for that product. Tesco PLC's accounts receivables for the quarter that ended in Feb. 2017 was $1,844 Mil.

Accounts receivable can be measured by Days Sales Outstanding. Tesco PLC's Days Sales Outstanding for the quarter that ended in Feb. 2017 was 9.42.

In Ben Graham’s calculation of liquidation value, accounts receivable are only considered to be worth 75% of book value. Tesco PLC's Liquidation Value for the quarter that ended in Feb. 2017 was $-38,522 Mil.


Definition

Accounts Receivable is money owed to a business by customers and shown on its Balance Sheet as an asset.


Explanation

1. Accounts Receivable are created when a customer has received a product but has not yet paid for that product. Days sales outstanding measures of the average number of days that a company takes to collect revenue after a sale has been made. It is a financial ratio that illustrates how well a company's accounts receivables are being managed.

Tesco PLC's Days Sales Outstanding for the quarter that ended in Feb. 2017 is calculated as:

Days Sales Outstanding
=Account Receivable/Revenue*Days in Period
=1843.75/35723.75*91
=9.42

2. In Ben Graham’s calculation of liquidation value, Tesco PLC's accounts receivable are only considered to be worth 75% of book value:

Tesco PLC's liquidation value for the quarter that ended in Feb. 2017 is calculated as:

Liquidation value
=Cash and Cash Equivalents-Total Liabilities+(0.75 * Account Receivable)+(0.5 * Inventory)
=7926.25-49268.75+0.75 * 1843.75+0.5 * 2876.25
=-38,522

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.


Be Aware

Net receivables tells us a great deal about the different competitors in the same industry. In competitive industries, some attempt to gain advantage by offering better credit terms, causing increase in sales and receivables.

If company consistently shows lower % Net receivables to gross sales than competitors, then it usually has some kind of competitive advantage which requires further digging.

Average Days Sales Outstanding is a good indicator for measuring a company’s sales channel and customers. A company may book great revenue and earnings growth but never receive payment from their customers. This may force a write-off in the future and depress future earnings.


Related Terms

Days Sales Outstanding, Revenue, NCAV, Cash and Cash Equivalents, Total Liabilities, Inventory


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Tesco PLC Annual Data

Feb08Feb09Feb10Feb11Feb12Feb13Feb14Feb15Feb16Feb17
Accts Rec. 00000008177091,844

Tesco PLC Semi-Annual Data

Aug12Feb13Aug13Feb14Aug14Feb15Aug15Feb16Aug16Feb17
Accts Rec. 003,80203,8438172,5007092,2451,844
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