Warnaco Group Inc. Case

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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.

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...
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