Saturday, October 1, 2011

Research: SMTX and Accounts Receivables Manipulation

SMTX - I'm seeing a large accounts receivable and small / negative net income for the past 4 years. Net income is when a company acknowledges a profit, and accounts receivable is the payment that the company has not yet received. SMTX has an accounts receivable larger than all of the income in the past 4 years combined.

This is one of the most common accounting manipulations. Someone who hasn't paid their bills in 4 years is not likely to pay their bills any time soon. Bad receivables should be written down and a loss needs to be recorded against income. Many companies do not do this. SMTX looks like one of them.

FUQI was a company in which I've gone through the 10K for a bad company. FUQI performed a similar scam, where they were able to increase revenues and income by allowing accounts receivables to persist.

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