Amazing Deals Auto Mart: Financial Reporting and Analysis of Receivables and Securitization

ABSTRACT: Amazing Deals Auto Mart (ADAM) is a nationwide retailer of late model pre‐owned premium cars. Due to the changes in the industry and economy, its senior management is concerned with a slowdown in collections and loan defaults, and is worried whether or not ADAM will meet the 2005 consensus earnings estimate of analysts. You are required to analyze the accounts receivable and allowance for doubtful accounts data to assess a possibility of earnings management. You are also required to perform financial analyses of the two financing alternatives (securitization and secured borrowing) that ADAM is considering for cash generation from receivables and to determine their effects on financial statements and ratios.