Interview Guides
You are reviewing a mid-sized agricultural processor’s Q3 close after the CFO flagged a cash squeeze despite stable revenue. You have the quarter-end balance sheet and a few operating metrics, and you need to explain what drove the change in cash and what to do next. The company reports under U.S. GAAP and all figures are in USD.
| Metric | Q2 | Q3 |
|---|---|---|
| Revenue | $420,000,000 | $438,000,000 |
| Gross margin | 12.0% | 11.2% |
| Accounts receivable | $118,000,000 | $141,000,000 |
| Inventory | $204,000,000 | $236,000,000 |
| Accounts payable | $96,000,000 | $101,000,000 |
| Cash balance | $74,000,000 | $49,000,000 |
Q3 days sales outstanding (DSO) = 29 days, Q2 DSO = 26 days. Q3 days inventory outstanding (DIO) = 48 days, Q2 DIO = 44 days. Q3 days payable outstanding (DPO) = 21 days, Q2 DPO = 20 days.
How would you diagnose the cash movement using working capital analysis, and what actions would you recommend to improve liquidity without assuming any revenue growth?