Unrestricted Cash / Cost of Sales (%)
There is considerable difference in the level of cash relative to cost of sales. In general, high margin business models with better terms of trade (i.e. receive cash early in the service delivery process) have larger levels of cash relative to cost off sales, as shown in Figure 13.
Under our accounting screen a red flag is triggered when cash/cost of sales is below the 20th percentile or above the 80th relative to industry peers (i.e. it is either very high or very low). Red flags are also triggered when cash/cost of sales changes at an unusually large rate over 1 and 3 years. Again, this is when the increase is below the 20th percentile relative to industry peers between 2010 and 2015, or the drop exceeds the 80th percentile.