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URL:  https://boards.fool.com/you-got-it-right-flowie-325-these-numbers-in-13380102.aspx

Subject:  Re: mdt flow Date:  9/27/2000  3:25 PM
Author:  crockers Number:  7144 of 8329
You got it right. Flowie = 3.25.

These numbers (in millions) are taken from MDT's 10-Q filed on 9/8/2000:
Current assets:
  Cash and cash equivalents                        $   575.2     $   448.4
  Short-term investments                               238.2         109.7
  Accounts receivable, less allowance for
    doubtful accounts of $31.3 and $30.2             1,154.5       1,210.1
  Inventories                                          751.4         690.6
  Deferred tax assets, net                             160.8         160.5
  Prepaid expenses and other current assets            244.7         394.1
                                                   ---------     ---------
    Total current assets                             3,124.8       3,013.4

Current liabilities:
  Short-term borrowings                            $   252.9     $   316.3
  Accounts payable                                     180.3         200.0
  Accrued expenses                                     530.9         475.2
                                                   ---------     ---------
    Total current liabilities                          964.1         991.5

Thus, the flow ratio = (3124.8-(575.2+238.2))/(964.1-252.9) = 3.25.

By looking at the current assets section of the Balance Sheet you can see that the 2 main culprits are Accounts Receivable & Inventory (bolded above). In the case of the RM criteria, we like to see these numbers as low as possible.

In this particular case, MDT's suppliers owe it over $1 billion, and MDT has $0.75 billion of inventory waiting to be sold. That's an aweful lot of money that could be put to better use.

Hope that helps.

Jim
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