i forwarded your notes two my sources... and a couple things:
acceptable levels of A/R cannot be defined simply by looking at a financial report. Every industry is different with regard to this and every company has certain caveats with regard to levels of A/R within those industries.
The only way to note a concern with regard to A/R is to audit the individual accounts and contracts that define A/R and then the subsequent failure rate associated with those accounts. Both agreed that the only real examples that they could point to with regard to captured A/R were found in the fy09 reports and neither had any concerns, that outwardly, their had been any type of material concerns thus far. based on the ramping growth through 09, they are both VERY excited to get their hands on the K.
for example: a 90 day turn on recovered a/r may cause a flag... however, if during the audit, it is found that contractually an agreement exists between the company and its partner that mandates this relationship, then the flag is withdrawn. this relationship would most likely make a footnote, but only by way of explanation... it would not be a 'bad' note... only if they saw a reoccuring balance by a particular relationship--and it was a large relationship--would they have any cause for concern.
What BOTH of my sources pointed out, is that ultimately A/R is exceptionally positive for a high growth company. It shows that the business is quite healthy and growing. Both were excited to see that SPNG's was accelerating at an appropriate level to their announced booked orders (as well as their history of increases found within their 09 financials). Surprisingly, or not so really, thier estimates come ridiculously close to Wadirum1's estimates with regard to % A/R increases as a function of the balance sheet.
now, one was much more stern, and the other more lighthearted about one thing but both commentary's basically asked the question: what would make this individual suggest that 10-20% of their a/r was uncollectable??? niether could emperically reproduce a number of this level, nor would either make a suggestion that any standard percentage could be agreed to or was even possible to surmize based upon ANY metric that they were aware of across any industry. A/R is a complete and individual function of specific relationships based on specific contracts. there is not a 'guideline' that they were aware of that would flag any particular company.
Second.. Both vehemetly disagreed with your conclusion on the cash flow section that you outlined. I will not repeat all of the comments that either of them made, but in essence, neither comment was excptionally flattering with regard to your suggested intelligence in the matter. on the whole both suggested that when you review the course selection for your 80hours worth of bi-annual continuing education CPA credits, that you should select something a bit more remedial this time around. One suggested a begining course on GAAP applications--but thought you might have to revisit the Jr college that you spent time at first... i know, like i said... not very flattering... sorry.
their arguements were highly in-depth and slightly confusing to my simple mind... but suffice it to say, that they had plenty to say about it. As it stands, it is not important to me to fully understand this issue... what IS important for me, is that i surround myself with intelligence that i can trust.
good luck harvard. I will say that you are a far cry more articulate than most, but unfortunately, your suppositions are still only that and relegate you to nothing more than equal to the others that spout nonsense. but that should give you at least a small feeling of accomplishment.
thank you for forcing me to delve deeper into this issue.
AI
