Tuesday, June 18, 2019
Popping the Lid on Smuckers’ Goodwill

Tuesday, June 11, 2019
Not Much Fizz in LaCroix Right Now

Wednesday, May 29, 2019
An Example of Calcbench, Excel, and Insight

Monday, May 20, 2019
Research Paper: Capex Spending

Thursday, May 16, 2019
Psst: Got Any Weed?

Wednesday, May 15, 2019
Open Letter: SEC Proposed Rule for BDCs

Friday, May 10, 2019
General Motors and Workhorse

Monday, May 6, 2019
How to Find Earnings Release Data

Tuesday, April 23, 2019
Following Restructuring Costs Over Time

Monday, April 22, 2019
Capex Spending: More Than You Might Think

Saturday, April 13, 2019
When AWS Takes Over the World

Thursday, April 11, 2019
Data Trends in Focus: Restructuring Costs

Sunday, April 7, 2019
How One Customer Crushed It With Calcbench

Thursday, April 4, 2019
TJX Shows Complexity of Leasing Costs Reporting

Tuesday, April 2, 2019
CEO Pay Ratios: Some 2018 Thoughts

Wednesday, March 27, 2019
Corporate Spending: Where It Goes, 2017 vs. 2018

Monday, March 25, 2019
Health Insurers: A Bit Winded?

Friday, March 22, 2019
Our New Master Class Video

Thursday, March 21, 2019
Tech Data’s Goodwill Adjustment

Tuesday, March 19, 2019
There’s Taxes, and There’s Taxes

Archive  |  Search:

Today we have another example of how financial analysts might use Calcbench to improve or accelerate your review of corporate disclosures. This time, we’re looking at deferred revenue versus cash.

Why? Because that metric can sometimes suggest trouble over a company’s longer term, depending on specific industry. Deferred revenues are money the firm will get sometime in the future, but not in the current filing period. Example: a multi-year contract to provide software or equipment. The initial payment is booked revenue; payments due within the next year are current deferred revenue; payments due after that are non-current deferred revenue.

A company with large amounts of deferred revenue relative to cash might hit turbulence in future filing periods, if its expenses balloon or that deferred revenue doesn’t materialize. For example, if you sign a five-year deal to manufacture equipment for a client, that’s lots of deferred revenue on the balance sheet. Then you need to spend money buying and processing materials — which could cause problems if you don’t have enough cash on hand for those initial costs.

A large amount of deferred revenue can also mean a larger risk of customers canceling orders in future years, leaving you holding a bag of fixed costs. If you don’t have enough cash, that bag could bust open. This is also why a spike in allowances for doubtful accounts should set off alarms all over the place.

What We Did

First we used the Multi-Company Search page to find the 2017 cash and deferred revenue reported by more than 450 filers in the S&P 500 so far. We divided deferred revenue into cash and expressed that as a percentage, and sorted the list from largest to smallest. The top 10 are in Figure 1, below.

Now, are those ratios dangerously high? Not necessarily. It depends on the company’s industry sector. For example, five of the above companies are insurance firms, and they routinely have sky high piles of deferred revenue, thanks to all those term or whole policies we all sign that last for decades.

The average for our whole population of 450 companies is 53.6 percent, but many filers have a ratio of zero because they don’t even report deferred revenue. So it’s unwise to draw broad conclusions about the S&P overall based on this metric.

You can, however, take the ratio for an individual company and apply it to that company’s peers. For example, right there on the Multi-Company page, you can enter a specific company’s ticker symbol and see the results (in this case, cash and deferred revenue) for that company only. Then you might want to click the Show All History box on the upper right, and all disclosures we have for that company will appear.

Or you can jump to the Company-in-Detail page, where the company’s financials will appear automatically. You can click the “Compare to Peer Group” option on the upper right side, which will give you a multi-company view for only those peers. Or, of course, you can create your own peer group.

Our point: Calcbench lets you quickly pull together any number of financial analyses that might help you identify hidden trouble, hidden potential, or many other insights. Then you can skip across various databases we have to study one company in detail, a peer group in detail, large populations as a whole, or whatever else catches your fancy.

The data is there. All you need to do is Calcbench it!

FREE Calcbench Premium
Two Week Trial

Research Financial & Accounting Data Like Never Before. More features and try our Excel add-in. Sign up now to try the Premium Suite.