Current Assets

1. Current Assets

1. Cash and Cash Equivalents

Nature of the Asset

• Cash and highly liquid short-term money market investment that have an original term to maturity of three months or less
• Cash equivalents are invested in a money market account offered through a Canadian financial institution
• Cash is denoted in USD. The functional currency is CAD and the foreign earnings are first translated in CAD using current rate method. The company’s balance sheet is then translated to USD at the foreign  currency  exchange  rate  in  effect  at  the  balance  sheet  date

Asset Valuation

• The carrying value of cash and cash equivalents approximates its fair value due to the relatively short-term maturities of these instruments.

Current Position

• On December 31st 2014, the cash balance of the company stood at $37,324 up from $28,200 from the previous year and cash equivalents at $4,312 up from $3,780 in 2013.
• The increase in cash and cash equivalent was however restricted by effect of foreign exchange translation that reduced the amount by $5,868
• The principal reason for the elevated cash position is due to the timing of funding for an acquisition  firm  closed  on  December  31,  2014,  but  paid  for  in  January
• Cash was used to pay income taxes ($35,333) and interests ($60,358) which was at par with previous year spending
• In general, the firm has shown increase in cash and cash equivalents value year on year
• The progressive cash ratio is 0.12 which is on the higher side as compared to Republic Services and Waste Connection Inc. whose cash ratio is at approximately at 0.03. The higher ratio can be attributed to company’s stance of using the available cash to meet the working capital needs. However the firm’s cash ratio is consistent with the previous year ratio
• Progressive’s cash and cash equivalent contributes just 1.2% towards the total asset. This percentage although low is high as compared to its two competitors Republic Services and Waste Connection (Approx. 0.3%) for the reasons similar to high cash ratio mentioned before
• Looking at the quarterly data, there is no indication of seasonality with respect to cash and equivalents and no sign of year end cash infusion

Bank Indebtedness Netting

• There is no sign of bank indebtedness netting for financial Year 2014.

1. Accounts receivables

Nature of Asset

• Comprises of trade receivables and allowance for doubtful account put together
• Segmented into two parts : Canadian and US
• No indication of receivables being collateralized, securitized, or financed

Asset Valuation

• The carrying value of accounts receivable approximates its fair value

Clients

• Provide services to commercial, industrial, municipal and residential customers in 13 U.S. states, and the District of Columbia and in six Canadian provinces

Recognition Policy

• Accounts receivable are generally due upon invoice receipt
• All amounts which are outstanding for a period that exceeds the current period are past due

  Current Position

• Account receivables net of allowance for doubtful account are segmented into Canada and U.S. and the figures on 31st December 2014 stood at $104,504 and $111,697 respectively. The consolidated figure was $216,201 a decline of approximately 6% on year-over-year basis
• The figure declined by $13,300 on year-over-year basis and was mainly due to $10,300 decline  in  Canadian  segment  receivables
• The decline in accounts receivable also reflects lower receivables in the U.S. northeast segment, due in  part  to  the  improved collection,  coupled  with  lower  fourth  quarter  landfill  volumes  and the  classification of receivables attributable to the Long Island, New York operations, a sum of $7,300, to held for sale
• Contribution towards the increase in asset acquired was $6,500 or just 6% (fourth quarter acquisition in U.S)
• Account receivable net of allowance for doubtful account forms 73% of total current assets and 6.4% of the total assets, figures that have remained stable when compared to 2013
• FX represents approximately  $9,500  of  the  year-over-year  change

  Days Receivable

• The average days receivable has dropped from 43.5 days in 2013 to 39.8 days in 2014
• The days receivable of Progressive is at par with the competitors Republic Services and Waste Connections having average days receivable at 39.16 and 44.01 respectively

Credit Risk

• Credit risk on account receivable is equal to the fair value of accounts receivable
• To limit the risks, Progressive performs credit checks and accept payment or security in advance of service. The advance payment is added to the deferred revenue in the balance sheet
• The diversity of the customer  base,  including  diversity  in  customer  size,  balance  and  geographic  location  inherently  reduces  the firm’s  exposure  to credit risk

Allowance for Doubtful Account

• Accounts receivable that are deemed by management to be at risk of collection are provided for using the allowance for doubtful account
• Management typically assesses aggregate accounts receivable impairment applying historical rates of collection giving consideration to broader economic conditions
• The allowance for doubtful account reduced from $6,857 in 2013 to $6,362 in 2014 on year-over-year basis
• The reduction in the account can be attributed to smaller addition to the account in 2014 as compared to 2013 ($4,283 in 2014 as compared to $6,083 in 2013)
• The recoveries has improved from $865 in 2013 to $1,355 in 2014 that corroborates the lower days receivable mentioned above
• A sum of $5,965 was written-off as uncollectible in 2014 consistent with previous year write-offs
• Progressive does not provide any aging schedule but has maintained the proportion of allowance in the total account receivable at 2.98% in 2013 and 2014
• This is lower than the allowance maintained by Waste Connections Inc. at 3.5% and Republic Services at 4% as historically Progressive has been able to collect the amount due to them

Adjustments

• Progressive show the gross Account Receivable net of allowance for bad debt on the balance sheet. This improves the days receivable and hence must be put in an a  separate line item

1. Other Current Assets

1. Other receivables

Nature of Asset

• Other receivables include direct finance lease receivables and notes exchanged from the sale of property (Note 3, Page 90)

                         Current Position

• The current portion of the Other receivable is $47
• Looking at the balance sheet of 2013, the current portion of other receivable comprises of a portion of direct finance lease receivables
• The value is rather insignificant as compared to the total asset of the firm, meager 0.015%

                          Valuation

The fair value of other receivables is estimated using a discounted cash flow analysis applying interest rates that management considers consistent with the credit quality of the borrower

• Other receivables are periodically reviewed for impairment and any resulting write-down to the net recoverable amount is recorded in the period in which impairment occurs

 Adjustment