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GuruFocus has detected 5 Warning Signs with The Valspar Corp \$VAL.
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The Valspar Corp (NYSE:VAL)
Accounts Receivable
\$692 Mil (As of Jan. 2017)

Accounts Receivable are created when a customer has received a product but has not yet paid for that product. The Valspar Corp's accounts receivables for the quarter that ended in Jan. 2017 was \$692 Mil.

Accounts receivable can be measured by Days Sales Outstanding. The Valspar Corp's Days Sales Outstanding for the quarter that ended in Jan. 2017 was 69.54.

In Ben Grahams calculation of liquidation value, accounts receivable are only considered to be worth 75% of book value. The Valspar Corp's Liquidation Value for the quarter that ended in Jan. 2017 was \$-2,164 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.

The Valspar Corp's Days Sales Outstanding for the quarter that ended in Jan. 2017 is calculated as:

 Days Sales Outstanding = Account Receivable / Revenue * Days in Period = 691.731 / 907.652 * 91 = 69.54

2. In Ben Grahams calculation of liquidation value, The Valspar Corp's accounts receivable are only considered to be worth 75% of book value:

The Valspar Corp's liquidation value for the quarter that ended in Jan. 2017 is calculated as:

 Liquidation value = Cash and Cash Equivalents - Total Liabilities + (0.75 * Account Receivable) + (0.5 * Inventory) = 153.68 - 3089.748 + 0.75 * 691.731 + 0.5 * 506.562 = -2,164

* 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

Historical Data

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

The Valspar Corp Annual Data

 Oct07 Oct08 Oct09 Oct10 Oct11 Oct12 Oct13 Oct14 Oct15 Oct16 Accts Rec. 538 565 518 629 665 681 771 840 857 815

The Valspar Corp Quarterly Data

 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 Accts Rec. 840 748 823 905 857 672 828 862 815 692
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