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China Carbon Graphite Group, Inc. Message Board

  • eight.ball63 Jan 28, 2013 7:14 PM Flag

    *** Watch out for This ***

    Anytime you see a Chinese company that has an account on its Statement of Cash Flows labeled "Advances to Customers" in millions of dollars, WATCH OUT

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    • CHGI has no advances to customers. Advances from customers (which CHGI does have) is actually a good thing because it shows pre-payment. Advances to suppliers is also a good thing to see in a highly leveraged company because it shows that input supplies have been paid for.

    • You read it wrong, or at least stated it wrong. It is advance to SUPPLIERS and advance FROM customers--NOT, contrary to what you said, advance to customers.

      The advances to suppliers pertain to the pre-payment for raw graphite. CHGI hedges its raw material purchases by contacting and paying for raw materials before they are needed. The reason is the increasing price of raw materials. Sometimes it is customers that contract and pay for finished products ahead of time, in order to hedge their (the customers') costs.

      The hedging has so far worked out very well for CHGI, saving them money and increasing their margins. CHGI does more hedging than do its customers.

      Nothing to "WATCH OUT" for when you correctly label the items and understand what they pertain to.

      So helpme_hanna

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