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    Ladysmith's Avatar
    Ladysmith Posts: 2, Reputation: 1
    New Member

    Feb 5, 2006, 10:34 AM
    Analyzing revenues and receivables
    Have been tasked with answering the following questions, but was advised that my calculations are off. The project is focused on Pfizer (major drug co).


    If the 10-K is available, determine what additiona disclosures are available concerning the allowance for doubtful accounts. If the necessary information is provided, what is bad debt expense as a percentage of sales?

    My Answer:
    Pfizer The 10K did not reveal any disclosures with regards to allowance for doubtful accounts. I do note on the annual report- consolidated balance sheet that there is an account receivable, less allowance for doubtful accounts (2004 - $205).


    What was the effect of the change in accounts receivable on cash flows from operations? Explain your answer.

    My answer:

    The effect is negative- the accounts receivable for 2004 decreased the cash flow by 465000 resulting in a remaining total cash flow from operating activities of 15,875,000. For the year 2003 the accounts receivable was 904000 revealing a differences of 439000 decreases between 2003 and 2004.

    Please advise as to where and what I am doing!
    dtdimic0's Avatar
    dtdimic0 Posts: 4, Reputation: 2
    New Member

    Feb 5, 2006, 07:43 PM

    Looks to me you are doing fine. I suggest some minor changes to your answers. You are correct that the 10K and financial statements do not reveal sufficient information to determine bad debt expense. They show only the allowance for doubtful accounts accumulated as of the end of each year. You might want to make it clear that Pfizer's allowance for doubtful accounts at the end of 2004 was $205,000,000. (Note at the top of the financial statements all amounts are in "millions, except common share data.")

    In your discussion of the effect of the change in accounts receivable on cash flow, you might want to make it clear that the change (increase) in Pfizer accounts receivable during 2004 reduced cash flow by $465,000,000. The change (decrease) in accounts receivable during 2003 increased cash flow by $207,000,000.

    Good luck!
    Ladysmith's Avatar
    Ladysmith Posts: 2, Reputation: 1
    New Member

    Feb 5, 2006, 08:47 PM
    Thank you so much for the encouragement and suggestions. I definitely need it. This accounting class has been a stressful journey for me.

    Thanks again

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