help interpreting a balance sheet

[arby]

This question has nothing to do with contracting but lots to do with accounting....

I've had a look at a certain company's accounts (a specialist secondhand car dealer) and something puzzles me. From one year to the next their trade debtor amount went from £1M to £3.5M. And his trade creditor amount went from £2.5M to £5.2M. I can't get my head around what this means, if anything. To the best of my knowledge their business model has remained largely the same: sell second hand cars. Some they own and some they market for clients. Average price is perhaps £75K. Any insights would be appreciated.

[BR14]

can this be moved to general Pleeeeeaaaaase???????

[northernladuk]

This question has nothing to do with contracting but lots to do with accounting.....

Don't you pay someone to help you with your accounting, someone who might offer you an insight out of goodwill?

[MrButton]

No idea. But FYI lots of car dealers do finance their whole stock on the forecourt.

[Maslins]

From one year to the next their trade debtor amount went from £1M to £3.5M. And his trade creditor amount went from £2.5M to £5.2M. I can't get my head around what this means, if anything.

They significantly increased credit terms with both suppliers and customers?
Or perhaps turnover and cost of sales have rocketed (ie business has grown significantly)?

[LondonManc]

Expansion generally. They've got more ambitious.
A bigger trade creditor account can mean that they've taken more stock on while a trade debtor increase will probably reflect that stock uplift and potentially the sales aren't keeping up with the inventory uplift. Quite possibly they've opened a couple more branches and need the extra stock.

[arby]

Apologies for those that got annoyed by my question.

As best I can tell they have been in the same single premises for many years. Can't find a single planning application for their premises since 2000. The inventory/stores value in their accounts remained similar from 17 to 18 - I would have thought if they borrowed stock then their trade debtor value would go up but so would their stock value? And I can't get my head around who could owe them so much money unless they're more a bank than a second-hand car.dealer.

Cash on hand was silly money - roughly £5K both years.

[malvolio]

Apologies for those that got annoyed by my question.

As best I can tell they have been in the same single premises for many years. Can't find a single planning application for their premises since 2000. The inventory/stores value in their accounts remained similar from 17 to 18 - I would have thought if they borrowed stock then their trade debtor value would go up but so would their stock value? And I can't get my head around who could owe them so much money unless they're more a bank than a second-hand car.dealer.

Cash on hand was silly money - roughly £5K both years.

Very little money is made from buying and selling cars - a few hundred per unit. The real money is from financial deals for their customers. So if more people are buying or leasing more expensive cars on credit - as seems eminently likely these days - their debtors and creditors balances will go up, while their cash in hand - i.e. the tin on the forecourt - will hardly change at all.

[arby]

I would guess the average sales price of their stock is £75-100K. It’s hard to tell what stock they own and what stock they are selling on behalf of a (typically) private client on a sale or return basis.

[meridian]

I would guess the average sales price of their stock is £75-100K. It’s hard to tell what stock they own and what stock they are selling on behalf of a (typically) private client on a sale or return basis.

Did you read the notes to the accounts? Does it mention anything in there?