[MUSIC] As we just saw before, what we're going to do now is compute the operation of ratios, specifically for days of collection. Now, what do we mean by days of collection? Well, if I zoom, and here you have a big zoom of the balance sheets for 2007, you can see that in the balance sheet on the asset side, apart from cash and other stuff, we have the box of receivables. And it says 649. Now, what is that? What is the receivables? As we said before, that's a box that has a lot of invoices, all the stuff that we have sold, but we haven't cashed in yet, right? So, how could we define days of collection? Well, it's basically the number of days my customers take to pay, on average. Or in other words, we could say that what I have in receivables has been sold during the last "X" days. Now, let me give you an example. For example, if I tell you that I sell 100 euros a year, and I have 50 euros in receivables, intuitively, what do you think about days of collection? How many days do you think I'll take to collect the money from my clients? Well, if I'm selling 100 euros a year, and I have 50 in receivables, do you agree with me that we would have half a year in receivables? So, the last six months I haven't received the money of the stuff I sold, right? Exactly, so it's 180 days, right? Now, let me put it in another way. So, if I sell 360 euros a year, and I take three months to collect, how much do you think I would have in receivables? Well, if I sell 360 a year, and I normally take three months to collect, 360 a year means one euro per day, right? So if I take three months to collect, three months is 90 days, so it's going to be 90 days, right? So, as you agree with me, we write to these two numbers, basically, out of intuition, right, which is this the most important, this is what I want to transmit to you. Intuition. Not just learned formulas, but heart, because you would forget them, right? Intuition. Now, is there any way to get a formula, or to put this intuition into a formula? Yes, there is, but let's think mentally, what is the exercise that you just did? First, what you find in receivables is what you have sold but you haven't cashed yet, right? Second, then to know how long our customers take on average to pay. We are comparing what we have in receivables with our sales, or with our daily sales, right? We are comparing those two things. Now, in other words, if our daily sales are X, and I have X in receivables, that means that I'm taking one day to collect, it's pretty simple right? But then, this turns it into a formula. Days of collection would be equal to what I have in receivables over the daily sales. Now, going back to the previous example, when I said, if I sell 100 euros a year, and I have 50 receivables, if I compute the formula, I get exactly what we said before, which is 50 over 100, which is the yearly sale over 360, which is what we get the daily sales, and we have 180 days. Now, this is very interesting, and then we know how to compute days of collection in a general way. Let's now turn to Polypanel in trying to understand how the customers of this Mr. Lichstein actually paid them, specifically the last year, right? If we take the P&L and the balance sheet for 2007, you see I highlight the two main items, right? Sales are 2,936, and then, receivables are 649 here. Now, if we compute the formula, days of collection will be receivables over daily sales, you see that this 649 over daily sales, that is 8,000 euros a day, it's about 81 days. So, do you realize that what this means is that, what we sold in the last 81 days, we haven't received any cash yet, what we received is the invoice and we have a box full of invoices, and that has to be financed. If we were to do exactly the same, but instead of for year 2007, we do it for year 2006 and 2005 and 2004, to see the evolution of my collection of days, this is what we find. Applying the same formula with the same numbers, you see that it goes from 70 to 74, then 78, and then to 81. [MUSIC]