@BRAGG
I failed to properly get my message across regarding the accounting issue of inventories.
You are absolutely correct that inventories are stated in the balance sheet as a current asset....that is only where it should be stated, but inventory levels change from one reporting peroid to another ....It is a function of production & sales. if sales lags production inventories will rise & vice versa.
Some companies including RFT state change of inventories in the P&L statement.
# Higher change in inventories is entered as an "accounting credit" / +ve entry in the expenses section....In other words it is considered as income or revenues even though they are still in the warehouse & haven't been sold yet.....This has the effect of artificially boosting the profit figures & it also squeezes cash flow.
# Lower inventory change is entered as an accounting debit / -ve entery that in effect will reduce the revenue figures , squeezes profits & boosts cash flow.
What we have with RFT is that production is going gang busters & sales lagging behind production.
The market is perhaps a bit uncomfrtable with this because you can produce as much as you want but if you can't sell you go bankrupt even though your profit figures looks good because of this accounting "trick" of including the higher production / inventories as income.
Historically RFT managed to clear larege stock piles of inventories in the past & I expect it corect this inventoris "anomaly" again.
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