factual

What financial instruments potentially expose the Spray Net company to concentration of credit risk?

Q: What financial instruments potentially expose the Spray Net company to concentration of credit risk?

OF SIGNIFICANT ACCOUNTING POLICIES **Basis of Accounting**-The accompanying financial statements have been prepared on an accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. Under the accrual method, revenues are recognized when earned and expenses are recognized when a liability is incurred, without regard to disbursement o Source: Item 23 — RECEIPTS (FDD pages 75–219)

Spray_Net Franchise · 2025 FDD

Answer from 2025 FDD Document

OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting-The accompanying financial statements have been prepared on an accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. Under the accrual method, revenues are recognized when earned and expenses are recognized when a liability is incurred, without regard to disbursement o

Source: Item 23 — RECEIPTS (FDD pages 75–219)

What This Means (2025 FDD)

According to Spray Net's 2025 Franchise Disclosure Document, the financial instruments that potentially expose the company to a concentration of credit risk primarily consist of cash and cash equivalents. The document specifies that the balances in Spray Net's cash accounts did not exceed the Federal Deposit Insurance Company's (FDIC) insurance limit of $250,000. Spray Net maintains its cash and cash equivalents with accredited financial institutions.

For a prospective franchisee, this information indicates that Spray Net's financial stability is closely tied to its cash management practices. The fact that cash balances are within FDIC insurance limits suggests a conservative approach to managing risk related to cash holdings. However, franchisees should be aware that any financial institution holding Spray Net's cash could pose a concentration risk if that institution were to face financial difficulties, although the FDIC insurance mitigates this risk up to $250,000.

It is important to note that while the FDD mentions cash and cash equivalents as primary sources of credit risk concentration, it does not elaborate on other potential financial instruments or relationships that could pose similar risks. A prudent franchisee should consider asking Spray Net for more detailed information about its financial risk management strategies, including diversification of cash holdings across multiple institutions and any other financial exposures that could impact the company's stability.

Disclaimer: This information is extracted from the 2025 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.

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