Message Font: Serif | Sans-Serif

No. of Recommendations: 0
<<8: Cash vs. long term debt for 1997:
Cash: \$270 million Accounts recievable: \$1.17 billion
Accounts payable: \$207 million 1.44/.207 = 6.95x which is over 1.5x

Actually this ratio is simply cash divided by long-term debt. Cisco has no long-term debt. Also, for this calculation you can add short-term investments to the cash. Neither accounts receivable nor accounts payable enter into the equation.

<<Flow ratio for 1997:
total current assets: \$3.1 billion
total liabilities: \$1.12 billion
(assets - cash) / liabilities =
(3.1 - .27)/1.12 = 2.53x (not less than 1.25)>>

Here you should subtract the short-term investments along with the cash and only use current liabilities in the denominator.

So, it should be (3.1 - .3 - 1.1) / 1.1 = 1.55 which is still a little high.

Both of these are discussed in the 11 Steps to Cash-King investing. It might help to re-read the relevant steps again, then if you have any questions, fire 'em back on the board.

Phil