Expert: Arthur Naman - 3/24/2009

Question
QUESTION: Hi Arthur,

I was wondering if "Changes in working capital" is the same as "changes in assets and liabilities"

Thanks


ANSWER: Changes in working capital means changes in short term assets and liabilities -- cash, AR, A/P, etc. Changes in assets and liabilities means changes in all assets and liabilities -- short term as well as long term.

if this explanation is not sufficient for you, please ask a follow-up questions.

---------- FOLLOW-UP ----------

QUESTION: Thanks for answering my question but I had one more question which is on a finacial statement where do I find "annual credit sales" I'm trying to calculate average collection period

Thanks

Tony

Answer
Annual sales is typically the sales amount on an annual statement of income. I do not mean to convey circular logic; if the financial statements are for the year, then the amounts shows are annual. If not for a year, as for a month, then an additional financial statement needs to be presented to determine the amount of sales for the year.

As for annual "credit sales," that amount is typically not found on a financial statement as sales based on credit are not separated from total sales. "Sales" are sales regardless of the method of payment -- cash, check or credit.

You might be able to find the amount in a footnote to the financials. Otherwise I am not sure what to suggest unless you are inside the company and have access to additional information about the company.