Today we are going back to the subject of receivables. Where to find the receivables on you profit and loss statements as well the required reserve cash to back up collateral held by the receivables.
First of let's look at our depreciated assets. The depreciation must be equal to your outgoing revenue. Sales and administration cost always proceeds your sales ie: inventory
Your inventory has to balance your depreciated costs.
Administration and sales amortize costs plus material costs.
So if you take your depreciated cost minus your administration " labor costs " and the amortized sales cost for the period you would get your raw material cost.
If you take that and minus your receivables you should get a negative number that is money owing too the debt holders.
if the money is owed to the share holder the receivables is now equity minus your depreciation with the proceeds now being added on too your outstanding share balance.
Now as with the requirement that the debt has a reserve fund so does the equity debt also require a ten percent reserve. If this reserve is not present ie: the equity being greater then the outstanding equity debt then the treasury stock has to make up the reserve difference.
Do your own DD and ensure these numbers balance with the required ten percent reserve on all receivables. Shareholders debt should not be treated any differently then any other debt. It's your money and the reserve is your capital cost allocation gareentee.
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