Home > Uncategorized > Is it worth taking Stock?

Is it worth taking Stock?

timber_stocksHad a discussion with a young accountant yesterday regarding balance sheets and largely around the issue of intangibles. In fact I had an example last week of an intangible which was pretty laughable whereas the other hand, as previously posted, intangibles are far too readily dismissed by many credit analysts

He mentioned stock as an item and had clearly been trained to put a high value on this. I suspect this is down to rather outdated tuition at certain institutes because the fact remains that stock is often hopeless.

Firstly with “just in time” the norm these days, why carry excessive stock? And if doing so, why are you lumbered with it? Doesn’t speak much for its value

Secondly retention of title blows a hole in its value. Whilst that naturally also reduces creditors in liabilities, there are likely to be penalties imposed by the supplier.

Lastly, whatever the value, the sale of it in the event of administration is not exactly going to be geared towards sticking around to get the best price. It will most likely be sold at a fraction of book value. Or end up in a skip

Of course the industry is the driving factor here with many industries being stock relatively stock intensive and stock that is a virtually a commodity, such as timber or oil, would be a better bet than printed material say

As ever, the devil is in the detail but an assumed book value is a very dangerous game indeed

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