Good Afternoon Class,

Carmax, Inc 10-K 

1. Reading the notes to the financial statements, as well as the balance sheet, post information about the Accounts Receivable for your company. Who owes the company money? It is possible that your selected company does not report accounts receivable as a separate line item because the company does not generally sell on credit terms.

According to one of the notes I found listed on page 53 of Carmax's 10-K report, the accounts receivable includes specific amounts due from third-party finance providers and customers and other miscellaneous receivables. The allowance for doubtful accounts is estimated based on historical experience and trends. The customers who finance their auto loans with Carmax when purchasing a vehicle are responsible for paying Carmax; hence these customers owe Carmax money. Carmax lists accounts receivable on a separate line under operating activities on the consolidated statement of cash flows sheet on page 51 because they do sell on credit terms. Carmax offers financing through various finance sources, such as CarMax Auto Finance.

2. Search for the phrase "Bad Debts" or Allowance (for collectible accounts). When you read the balance sheet, you may see that the receivables are listed as a net of $X,XXX to show the Allowance for Bad Debts. Comment about the changes in Accounts Receivable and the Allowance for Bad Debts. Are they increasing or decreasing? How does this relate to sales (are sales increasing or decreasing)?

The accounts receivable was listed at 6,259,000 for 2019, 51,240,000 for 2020, and 43,507,000 for 2021. (page 51) This means there was an increase from 2019 to 2020 but a decrease from 2020 to 2021. This mirrors the company's increase and decrease in their sales for the past few years. I would think this decrease was expected in the last year due to the pandemic and many chip production issues within the car sales industry. According to the loan performance information on page 38, the allowance for loan losses (bad debt) increased from 138.2 million in 2019 to 157.8 million in 2020 to 411.1 million in 2021. So the bad debt has steadily increased for Carmax. I would expect this due to the increased pricing on used cars resulting in higher loans for people. After looking at this data, I would assume people are having a harder time paying their loans over the past three years. I am interested to see the balance sheet for the 2022 year because I feel that sales of used cars will increase due to the lack of production of new cars. However, the huge price increase on used cars may also cause a decrease in overall sales of used cars. So at this point, I could see it going either way on next year's 10-K.

3. Property, Plants, and Equipment / PPE (Capital Assets; Fixed Assets): Comment about PPE and accumulated depreciation. How are these values changing from year to year: PPE, Accumulated Depreciation, and Net PPE?

Property and equipment is stated at cost less accumulated depreciation and amortization. They are calculated using the straight-line method over the shorter of the asset's estimated useful life or the lease term. Costs incurred during new store construction are capitalized as construction-in-progress and reclassified to the appropriate fixed asset categories once the store is completed. Accumulated depreciation has increased each year in Carmax's 10-K reports. It increased from 182,247,000 to 215,811,000 from the 2019 to 2020 year reports. It then increased to 242,156,000 for 2021. As expected, depreciation is continually increasing for Carmax because a car is usually known as a depreciating asset. PPE has decreased slightly from 3,069,102,000 in 2020 to 3,055,563,000 in 2021. To get a better idea regarding the PPE expenses, you can view the pie chart shown on page 36, which gives a physical representation of the total SG&A expenses for Carmax.

I hope everyone has a great week!

-Branden

References:

CarMax's faqs answered, including how we choose our cars. (2021). https://www.carmax.com/faq/financing

1. Reading the notes to the financial statements, as well as the balance sheet, post information about the Accounts Receivable for your company. Who owes the company money? It is possible that your selected company does not report accounts receivable as a separate line item because the company does not generally sell on credit terms.

The account receivable for Nike are considered as non current and recorded as deferred income assets. As of May 20,2021 uncollected accounts receivable 93 million and 214 million dollars. There are multiple countries that owe Nike, also there are creditors. 

1. Search for the phrase "Bad Debts" or Allowance (for collectible accounts). When you read the balance sheet, you may see that the receivables are listed as a net of $X,XXX to show the Allowance for Bad Debts. Comment about the changes in Accounts Receivable and the Allowance for Bad Debts. Are they increasing or decreasing? How does this relate to sales (are sales increasing or decreasing)?

The changes in accounts receivable and the allowance of bad debt has had a significant increase since COVID 19. May 2020 and 2021 shows a increase from 93 million dollars to 214 million dollars. There are many more people owing Nike money within the last year. The increase has risen due to the fact the economy has inflated. However, on the other hand sales Nike sales has dropped 4% due to COVID 19. 

1. Property, Plants, and Equipment / PPE (Capital Assets; Fixed Assets): Comment about PPE and accumulated depreciation. How are these values changing from year to year: PPE, Accumulated Depreciation, and Net PPE?

Due to COVID 19 PPE has taken decreased, however depreciation has increased over the past 2 years. The values of PPE, Depreciation and Net PPE has changed due to the unexpected  change of events that has taken place. When stocks crash and product inflates or deflates you will have a major decrease in product but a increase in depreciation because it will not be valued at the same price. In 2021 PPE was 4,904,000 and in 2020 it was 4,866,000. 

Reference:

Inline XBRL Viewer (sec.gov)

Bain, Mark (2021) Sales at normally resilient Nike plunged due to Covid-19 — Quartz (qz.com)