Warnaco Group Inc. Case
The Warnaco Group Inc. – Accounts Receivable Refer to Warnaco’s Form 10-Q for the quarter ended April 3, 1993. A. What is a Form 10-Q? How do the financial statements included in a Form 10-Q differ from the financial statements included in a Form 10-K filing? The Form 10-Q is a quarterly report designed to give a status of how a business is doing after three months of operation. The Form 10-Q and the Form 10-K differ in the report’s interval; the Form 10-K is an annual report. B. Why don? t Warnaco’s financial reporting periods end on the same date each quarter or year?
Because a quarter is measured by quarters, is not measured by months. C. How much cash does the company have as of April, 3 1993? Compare this to the amount at January 2, 1993. Discuss the difference between these balances. What factors would contribute to the reduction in cash from January 2 to April 3? The company has $ 35 from April 3, 1993. The cash difference between April, 3 1993 and January 2, 1993 is the amount of $3,728. The factors that could contribute to the reduction in cash are principally the accounts receivable, the fixed assets and other assets.
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D. What percentage of total assets does Warnaco hold as accounts receivable at the end of the end of the quarter? How does this compare to the year ended January 2, 1993? Interpret this difference in light of the seasonality of Warnaco’s operations. 21. 11% this is total assets as accounts receivable at the end and between January 2,1993 16. 67%. The liquidity of the firm diminished between the first and second quarter. E. Based on the results of the first quarter, what is the accounts receivable turnover ratio for the year?
Remember, you are using quarterly data to compute this ratio. What assumption do you need to make in calculating this ratio? Comment on the reasonableness of that assumption. What is the average number of days receivables are held before collection? 1. 096 times that the company collects cash from costumers offering credit. Also 333. 029 days it’s the inventory turnover of Warnaco. F. In its January 2, 1993 annual report, Warnaco reported that accounts receivable were $122,894 and $87,180 at January 2, 1993 and January 4, 1992, respectively.
Net revenues for the year ended January 2, 1993 were $625,064. What was the company’s accounts receivable turnover ratio for the year ended January 2, 1993? Average number of days receivables amounted to 50 days of sales during the year ended January 4, 1991. What does this trend suggest? 2. 734 time that the company collects cashfrom costumers offering credit. Also 18. 288 days it? s inventory turnover of Warnaco. G. Assume that the balance in Warnaco ? allowance for doubtful accounts was 2% of the ending balance in gross accounts receivable at both January 2 and April 3, 1993 and that $1 million of accounts receivable were written off as uncollectible during the first quarter of 1993. Provide the journal entries for all events that reconcile the gross accounts receivable and allowance for doubtful accounts balances between January 2 and April 3, 1993. 01/02/93| | | | | | | Balance General| | | | | | | | | | | Activo| | | | | | Cuentas por cobrar| | | $122,894. 00| (-)| Provision de cuentas incobrables| | $2,457. 88| | | | | $120,436. 12| | | | | | | | Cuentas T| | | | | | | | | | | | | | Gasto de cuentas incobrables| | Provision de cuentas incobrables| | 1)| $2,457. 88| | | | $2,457. 88| (1| | | | | | | | | | | | | | | | | | | | | | 04/03/93| | | | | | | Balance General| | | | | | | | | | | Activo| | | | | | Cuetas por cobrar| | | $139,072. 00| (-)| Provision de cuentas incobrables| | $2,781. 44| | | | | | $136,290. 56| | Cuentas T| | | | | | | | | | | | | | Gasto de cuentas incobrables| | Provision de cuentas incobrables| | 1)| $2,781. 44| | | | $2,781. 44| (1| | | | | | | | | | | | | | | | | | | | | H. Refer To The Attached Wall Street Journal Article (Warnaco short-seller cite receivables, debt, paltry cash level despite analysts ‘support) what could account for the difference between the analysts and Warnaco s calculations of the average collection period? Have increased the days when the company takes to collect the sales compared to previous years. A year ago it took to charge 56 days and 52 the year before, now it takes over 70 days to charge a sale when the CEO of Warnaco said to have a policy that its collection does not exceed 60 days.
This could suggest that the accounts exceeding 70 days could become uncollectible accounts. I. Is the comparison of Warnaco cash balance to the cash balance at jones apparel group crystal brands and Phillips-van heusen a fair one? Why or why not? No, because the three companies that are compared with Warnaco are companies that manufacture all kinds of clothes for men and women, unlike Warnaco is dedicated only to underwear for men and women and therefore the market share of Warnaco should only underwear.
J. Now think about the financial markets. What is a short seller? What factors would support a short position in Warnaco stock? Brokers are most commonly used but the buying and selling of stocks can occur with a stock broker or directly from the company. They serve as an intermediary between the investor and the seller and often charge a fee for their services. http://www. pfhub. com/factors-to-consider-before-short-selling/