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Progress Energy Earnings are Deceiving



March 13, 2012 – Comments (0) | RELATED TICKERS: CCC , PGNPQ , USO

Earning can be telling for a company, but it doesn’t tell all! There is much more to a company than their earnings, not to mention they can be misleading if this is what you use for all your analysis. Let’s dig deeper and see why Progress’ earnings aren’t so sharp. Seth Jayson has compiled all the important details.

"Let’s break this down
In this series, we measure how swiftly a company turns cash into goods or services and back into cash. We’ll use a quick, relatively foolproof tool known as the cash conversion cycle, or CCC for short.

Why does the CCC matter? The less time it takes a firm to convert outgoing cash into incoming cash, the more powerful and flexible its profit engine is. The less money tied up in inventory and accounts receivable, the more available to grow the company, pay investors, or both.

To calculate the cash conversion cycle, add days inventory outstanding to days sales outstanding, then subtract days payable outstanding. Like golf, the lower your score here, the better. The CCC figure for Progress Energy for the trailing 12 months is 56.0."


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