First up this week is

Van Christenson

, who writes: "I own, quite successfully, a company whose latest 10-Q showed a gain of 20% in revenue. However, its receivables were up 40%. What procedure should I follow in order to ascertain whether this is a troublesome situation?"

Van, it's never a good sign when receivables shoot up faster than sales -- which means the company isn't being paid for product as fast as it is going out the door. But sometimes there's a legitimate reason, such as a lot of sales at the end of a quarter, which is a way of life at plenty of companies. The trouble starts when receivables keep ballooning quarter after quarter, especially at a company whose business, or industry, has started to slow. Or at a company that has had trouble living up to Wall Street's expectations.

The concern, of course, is that the company is convincing customers to take more products than they really need. This is known as "channel-stuffing." The trouble with channel-stuffing is that it can come back to haunt a company if it causes customers to order less product in future quarters.

The difficulty comes in distinguishing channel-stuffing from normal business. It's easier said than done. One way is to look at receivables days outstanding -- which shows how long it's taking the company to get paid. The figure is calculated by taking sales and dividing them by the number of days in a quarter or year (depending on the period you're looking at). That gives you the company's average sales per day. Next, divide the company's receivables by the average sales per day. The result is the receivables days outstanding number. It's always a big red flag if the days outstanding keep rising more and are higher than they are at competing businesses. Another way to check up on a company -- which short-sellers often do -- is to actually talk with retailers, distributors and other customers.

But there's obviously more, and that's where this column's readers come in. Have a better explanation? How do you spot channel-stuffing? Tell me with a post on our boards. Then, I'll take your comments and condense them in a future column. Should be helpful for all.

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Memo to

Bruce Koopmans

, who wants to know how soon after an insider files to sell a company's stock, through a Form-144 filing, that it can be sold: There's no waiting period once a 144 sale registration has been filed. "If a 144 sale has been filed, you can assume all of the requirements have been met for the insider to sell," says

Bob Gabele


First Call/Thomson Financial


Gabele also says most insiders don't wait too long to sell their registered shares, either. "Typically," he says, "that stock has already been sold; typically these are sold on the day the filings are made public."

Memo to readers: Don't forget to send us your questions about complex market issues, from trading and short-selling to balance sheets and accounting gimmicks, to, or post them on my

message boards. And don't forget, if you disagree or care to elaborate on my answer to this question or any question, please do so on the boards.

Herb Greenberg writes daily for Mark Martinez assisted with the writing and reporting of this column. In keeping with TSC's editorial policy, neither owns or shorts individual stocks, though both own stock in They also don't invest in hedge funds or other private investment partnerships. They welcome your feedback at